Things to Consider Before You Get Laid Off: Lessons From My First Time
I recently experienced my first layoff. Even though I had some suspicions beforehand, I didn’t know for sure—and nothing truly prepares you for it. Still, a few things I had done in advance helped soften the blow. If you’ve never been through this, or you suspect you might someday, here are some lessons and strategies I wish I had fully appreciated earlier.
1. Live Under Your Means
This is the single biggest factor. The less you inflate your lifestyle to match your paycheck, the more flexibility you’ll have when that paycheck suddenly stops. Every dollar you don’t spend is a dollar of breathing room later.
2. Expense Management and Reduction
Think about expenses in two layers:
“Just in case” reduction – trimming excess subscriptions, unnecessary splurges, and delayed upgrades.
Bare-minimum survival budget – the essentials: mortgage/rent, insurance, food, utilities, gas, loan payments, clothes.
Do you know your true bare minimum? Having this “emergency budget” pre-calculated makes it easier to react quickly. Keep a running inventory of all recurring expenses so you can cut back immediately if needed.
3. Savings Priorities
My rule of thumb has been to save enough to cover six months of my ideal salary, not just survival costs. Combined with aggressive expense cuts, this stretches further than six months in practice. But in hindsight, six months still feels short. If possible, aim for longer.
A few specific strategies:
Debt: Minimize credit card debt while employed, in fact try to maintain a $0 balance. If you do carry loans, focus on paying them down steadily while still keeping your investment principal intact. Aim to keep interest rates below ~4% and if you have loans with higher rates, pay those first. The lower rates can still live in investments and earn net positive interest while making payments.
HSAs: Max out your Health Savings Account every year if you’re eligible. These accounts stay with you and can act as a lifeline for qualified expenses later.
4. Build and Maintain Your Networks (Both Kinds)
Professional network: Stay active in your industry. Keep relationships warm with colleagues, vendors, and especially recruiters. Don’t wait until you’re unemployed to reach out for the first time in 15 years.
Personal network: Friends, community groups, or local affiliates can be invaluable for practical support—whether that’s moral encouragement or help covering basics like groceries.
Career Maintenance: Keep both your resume and Linkedin updated on a regular basis, not just when you’re looking. Track your wins and achievements as they happen so you don’t have to scramble later.
5. Negotiate Severance Up Front
Most people only think about severance once it’s too late. While you may not have much leverage, awareness matters. Ask about severance policies when you join a company. Even if you can’t change the terms, knowing them helps you make better career decisions.
6. Health, Insurance, and Taxes
These are areas most people overlook until it’s too late:
Long-term disability (LTD): When your employment ends, so does your employer-sponsored LTD insurance. Consider whether a supplemental private policy makes sense earlier in your career.
Health insurance (COBRA/ACA): COBRA is notoriously expensive—often $2,000/month or more. If you get severance, you may not qualify for subsidies through the ACA marketplace, meaning you could be paying the same for less coverage. Plan for this expense in advance.
Taxes: Severance is taxable and can bump you into a higher tax bracket. Depending on timing, you may need to make IRS prepayments to avoid penalties. Speak with a tax accountant quickly after a layoff.
Legal: Be aware of non-competes or other restrictive covenants that may limit your next steps. When you receive your separation agreement, have an attorney review it for hidden gotchas. Expect to pay $300–600, but it’s well worth it.
7. Your Financial Strategy
Side business: If you have one, it can provide both supplemental income and legitimate business expenses that lower your overall burden.
Investments: While you generally don’t touch your 401(k), you may need to adjust taxable portfolios if your priority shifts toward principal preservation. Talk with your advisor about tradeoffs between short-term safety and long-term growth.
8. Mental Health and Rest Matter
When the layoff comes, the natural instinct is to immediately rush into job applications. My advice: don’t. If you’ve set yourself up with savings, expenses, and networks, give yourself a week or two to breathe.
If you had a vacation planned and already funded—go.
Use that time to reset mentally.
Then come back with a clear strategy for how you’ll job-hunt.
9. Stay Aligned With Your Partner
Layoffs put enormous strain on relationships, especially around money. Talk openly with your partner about finances, priorities, and expectations. Being on the same page prevents resentment from building.
10. Random Observations
People stop connecting with you organically on LinkedIn once your title changes.
$1 feels a lot different with no income. That $3 movie, $7 subscription, or $40 dinner suddenly feels like a big decision.
I’ll have a lot more to add later about starting a business as well.
Final Thought
A layoff is never easy, but preparing before it happens makes all the difference. Live below your means, keep your networks alive, and know your financial baseline. Then if it happens, give yourself permission to pause, breathe, and reset before charging into the next chapter.