to incur any new expenses, as family friends provided him food and shelter. After a few months of temping through Whitman Associates Inc., a temporary employment agency, Hendricks got a call from the agency manager with a job offer from a Washington, D.C.-based private sector, nonprofit corporation that oversees the auditors of publicly traded companies. Now, two years later, Hendricks is the facilities supervisor, with oversight of mailroom operations, supplies, inventory, event scheduling, and property management liaison duties. Hendricks is currently pursuing certification in facilities management at George Mason University in Fairfax, Virginia. He and his wife are reconciled and welcomed a second daughter in March.
The layoff taught Hendricks valuable financial lessons, and he and his wife have made their finances a priority. “Now, I pay myself by contributing 10% to my 401(k) even though my company only matches 6%,” he says. The couple takes full advantage of medical and tax-free dependent care benefit programs to minimize their taxable income while ensuring key expenses are covered. They also stick to a strict budget and are currently seeking professional financial planning services.
How to Stop the Bleeding. Hendricks illustrates that few things deliver a financial shock like a layoff, especially when you don’t see it coming. “The most immediate negative impact is raised by the question, ‘How am I going to support myself and/or my family?'” says Susan R. Black, director of financial planning at Conshohocken, Pennsylvania-headquartered eMoney Advisor, a wealth planning technology and management solutions provider. A job cut can easily become a full-blown crisis without the recommended three- to six-month salary cushion and invite hasty decisions that could spell further economic trouble.
With some basic guidance, Black says you can successfully manage your finances before and during a layoff. If you have advance warning, pay down your debt and build up your savings as much as possible. Temporarily stop contributions to your retirement plan if you do not have enough money saved. If you’re married, have your spouse temporarily stop or lower retirement plan contributions as well. Black also suggests securing a line of credit. “If you wait until after you lose your job, you probably will not qualify for one.”
When it comes to severance, review your signed employment contract; your company may have a standard offer. If not, you may be in a stronger position to negotiate a better package if your employer needs you to finish projects before leaving or do some consulting/fill-in work after your official termination.
Of course, you will want to revise your budget to see your spending in black and white and bring it in line with your new financial situation. Now is the time to practice some fiscal responsibility. Determine which expenses are mandatory, then cut all or most of your discretionary spending in the short term.
In the end, a layoff is a wake-up call. “It can be a time in life when new opportunities open up,” asserts career coach Frank Traditi. “It is also a time to take stock in yourself and [learn