Losing your job can profoundly affect many aspects of your finances. Not only will unemployment reduce or eliminate your regular income, but it can also mean the loss of important benefits like health insurance.
Reacting quickly and with grace can help you to minimize or avoid major problems that come with becoming unemployed, so it's important to know exactly what steps to take after you've been let go, as well as what not to do if you lose your job.
Here are the 15 most important things to do if you lose your job:
- Negotiate a severance agreement
- Collect your last paycheck, along with accrued vacation and sick time
- Apply for unemployment benefits, if you're eligible
- Review your non-compete agreement
- Decide what to do about health insurance
- Rework your budget and cut spending
- Reach out to your network
- Update your LinkedIn (or create a profile)
- Evaluate your career path
- Update your resume
- Clean up your social media accounts
- Connect with your coworkers
- Brush up on your job skills and industry knowledge
- Apply strategically for jobs
- Determine what to do with your 401(k)
1. Negotiate a severance agreement
In some cases, departing employees who are laid off through no fault of their own are entitled to severance pay. Severance pay is a set amount of money paid to employees who are let go due to restructuring, staff cuts, or for other reasons besides misconduct. Your company may have a policy on severance pay, so read your employee handbook or employment agreement -- if you have one -- to see if you're entitled to severance.
If your employer has more than 100 employees, the Worker Adjustment and Retraining Notification Act of 1988 (WARN Act) entitles you to 60 days' notice when mass layoffs occur. If you're entitled to notice under the WARN Act and your employer doesn't provide it, you're legally entitled to severance.
If you are eligible for severance, you may be able to negotiate the terms of the agreement -- so don't assume you have to accept the first offer your employer makes. These tips for negotiating a severance package can help you try to maximize the benefits and compensation you receive from your employer when you're let go from your job.
2. Collect your last paycheck, along with accrued vacation and sick time
In some states, employers are required to provide your last paycheck immediately upon terminating your employment. Others allow your employer to send your last paycheck on your regular payment schedule. Employers are generally not allowed to withhold your last paycheck, upon contingencies like your return of company property.
If you have unused paid vacation or sick days, you may be entitled by your state's laws to collect payment for this accrued time off. Nearly half of the U.S. states mandate that employers include payment for unused vacation or sick days. Even if your state doesn't require this, it may be company policy to pay out for these benefits.
Find out the law from your state's labor department so you get the pay you are entitled to. You can also read your company handbook and talk with your employer about being paid for vacation or sick time you didn't use.
3. Apply for unemployment benefits, if you're eligible
If you were let go from your job through no fault of your own, you will probably be entitled to receive unemployment benefits.
State laws vary on when you're qualified to receive benefits, but you typically must be actively looking for work and must have worked a particular number of hours or earned a certain amount of money at your past job. You can find out your individual state's laws and get instructions for filing at CareerOneStop. You can apply for benefits online and should do so as soon as possible so you can collect them as soon as possible.
Unemployment benefits are taxable and the amount you'll receive is equal to a portion of your past wages -- you won't get the full amount you were earning. There are also caps on how long you can receive unemployment benefits. Still, having money coming in is important, so don't skip this step if you're eligible for benefits.
4. Review your non-compete agreement
If you had a non-compete agreement with your current employer, you need to know any restrictions and limitations it places on you, so that you don't violate it when looking for new work.
In some states, such as California, non-compete agreements are virtually unenforceable, while other states give much more deference to employers in restricting what you can do once you've left your job. Still, no matter where you live, restrictions on your future employment must be reasonable. This means the agreement must be narrow in time, location, and scope.
It may be worth getting some legal advice if you have concerns about the restrictions imposed by your non-compete agreement. After all, you don't want to be prevented from applying for jobs in your field by an overly broad agreement that stops you from taking most jobs you're qualified for.
If you're negotiating a severance package with your employer, you may want to broach the subject of renegotiating or narrowing the terms of any past non-compete agreements you may have signed.
5. Decide what to do about health insurance
If you had health insurance through your employer, deciding what to do about insurance is a pressing concern. That's because your employer is most likely not going to continue paying premiums for health benefits once you leave work -- unless you've negotiated for this in your severance agreement.
Under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), you're allowed to keep your coverage through your employer for up to 18 months (or potentially longer if you're disabled). However, you will likely have to begin paying for the full cost of premiums if your employer was subsidizing them. As a result, options for coverage under COBRA can be very expensive.
You also have other options besides electing to stay covered with your employer. You could look into getting covered by a spouse's plan if possible. Or, you could purchase coverage from an Obamacare exchange. Losing coverage due to a job loss is a qualifying life event that entitles you to buy a policy on the Obamacare exchanges outside of open enrollment, so you can get covered whenever you lose your job.
It is possible you'll be eligible for subsidies to help you afford coverage on an Obamacare exchange, so this may be much more affordable than COBRA coverage. Of course, your new plan may not allow you to continue seeing your current doctor, so review your options carefully.
Whatever you do, be sure to make some decision about healthcare coverage ASAP. You do not want to go without insurance and end up facing serious financial disaster if you have a medical issue when you're without coverage.
6. Rework your budget and cut spending
Chances are, you'll be living on less income due to your job loss, even if you've qualified for severance and unemployment benefits. And even if you have a generous severance package, you don't know how long your period of unemployment will last, so it's a bad idea to keep spending as you were when you had a regular paycheck.
Sit down with your budget and look for places you can cut back. You may decide to drop your gym membership, eliminate cable, stop eating out, and start using coupons at the grocery store. Anything you can do to reduce your spending will help ensure the loss of your job doesn't create serious financial hardship for you.
If you don't already have a budget, now is a good time to make one. Ensure that your monthly outflows can be met by the income you have coming in from unemployment, your spouse's paycheck, savings, or other income sources.
7. Reach out to your network
Now's a great time to reach out to all of your connections and let them know you're looking for new work. Let them know what kind of position you're interested in and ask them to keep their ears open for you.
Think about people you know from past positions, those you've connected with at industry events, and others in your circle who might know of opportunities. Networking both online and in person can make or break your job search. The people who already know you best are the most likely to be proactive in helping you find your next great job opportunity.
8. Update your LinkedIn (or create a profile)
The internet has made networking easier than ever, so be sure to take advantage of online tools after a job loss. In particular, LinkedIn can help you to make connections and find out about career opportunities.
If you don't have a LinkedIn profile already, create one and start connecting with people you know. Make clear on your profile that you're looking for opportunities for work and ensure you've provided details about your past successes so you come across as an attractive candidate. You may even be able to get others within your industry who are familiar with your work to endorse your skills.
If you already have a LinkedIn profile, update it to specify that you've left your current position and are looking for new work. Also, be proactive in reaching out to people who work at companies you're interested in, especially if you have a mutual connection.
These tips can help you to create a great LinkedIn profile and to use this professional networking service to find work.
9. Evaluate your career path
The loss of a job is also a good time to think about where you want your career to go.
You don't have to just start applying right away for positions similar to the one you left -- especially if you weren't happy with the work you are doing. Take a little time to think about aspects of your job you did, and did not, enjoy in considering what you want to do next.
If you're toying with the idea of a career change, start looking at positions that suit your skills and expertise, or explore the credentials you'd need to move into a different position or industry. If you can afford to not look for immediate work, now might be the ideal time to pursue your dreams.
If you're hoping to make a shift in your career, check out temp jobs in your desired new industry or position. Companies may be more willing to take a chance on a total novice in a temporary position. By taking a temp position, you could build your resume and develop the skills you need. Ideally, a temp job could even turn into a full-time position if you prove yourself.
10. Update your resume
No matter what kind of new job you're going to look for, an outstanding resume is key to landing an interview, and ultimately getting hired. So, now is the time to get your resume in tip-top shape.
Customize your resume for each job you apply for and showcase the skills most relevant to the role. Most people create chronological resumes that show how their career has unfolded, but if you were with your past company for a majority of your career, a skills-based resume might better highlight your different talents.
These tips for creating an awesome resume can help you get this crucial employment document in order so you can catch the eye of hiring managers.
11. Clean up your social media accounts
Today, employers routinely investigate the social media history of candidates who apply for jobs. So, now's a great time to make sure there's nothing on your Facebook, Twitter, or Instagram that could get you into trouble, raising red flags to your potential employer.
Making your accounts private is one way to go, but you should also pay attention to other pictures you're tagged in on your friends' pages. And be sure to avoid complaining about your job loss or your past employer online, as this won't paint you in the best light as a potential employee.
12. Connect with your coworkers
When you apply for new jobs, you may require references from former coworkers or bosses. So, make sure you keep in contact with your manager and officemates at the job you're leaving.
Ideally, you'll be given the chance to say goodbye and exchange email addresses and other contact info before you leave work. But even if your layoff comes as a surprise and you have to leave quickly, reach out via social media or email.
When you initially make contact, simply say hello and let them know you'd like to stay in touch, then make the effort to do so. Not only does this help you to expand your professional network, but it also ensures you have these key contacts in place when new employers make a reference request.
13. Brush up on your job skills and industry knowledge
You want to stand apart from the crowd when applying for new jobs, so now is the time to study up on everything going on in your industry. Sign up for industry job boards, follow career blogs in your intended sector, read industry publications, and keep up with industry leaders in your field.
By brushing up on the latest news and working to refresh your skills, you can enhance your resume and be ready to answer even the toughest interview questions. You may also decide to take the time to establish your own profile as an expert in your industry by writing blog posts or articles that show off your knowledge.
14. Apply strategically for jobs
While enhancing your skills and considering your career trajectory are both important, none will do you good until you actually apply for the jobs you want. When you start applying for work, it can be tempting to send your resume to any employer with an open position that's remotely similar to the type of job you're looking for.
Bombarding employers with your resume, though, is a bad idea. First, it's a turnoff to employers to receive resumes when you're clearly unqualified for the position. And second, sending off too many resumes means you won't have time to focus on putting together really excellent applications for jobs that are an ideal fit.
If you're strategic about what positions you apply for, you can take the time to do it right, customizing your resume and cover letter, combing your LinkedIn and network for contacts at the company, and learning about the business and industry so you're ready for an interview. And you can make sure the job you're inevitably offered is one you'll be happy to accept.
15. Determine what to do with your 401(k)
Finally, you'll have to decide what to do about the 401(k) you have with your old employer, if you had a retirement account at work. You have a few options, including leaving the money invested with your former employer, rolling over the account into an Individual Retirement Account (IRA), or rolling it over into a 401(k) with a new employer, when you find one.
Leaving your 401(k) funds invested is a good choice if you're happy with your investment mix and with the fees you're currently being charged by the 401(k) administrator. However, if your balance is too small or your company is shutting down, this isn't always an option. And if your 401(k) has a very limited array of investment options or charges you high administrative fees, another solution is best.
Rolling over your 401(k) into an IRA can give you the most flexibility in terms of what brokerage holds your account and what you invest in. You can also open a free IRA with many discount brokers to avoid paying account maintenance or management fees. But if you choose an IRA, you will have to direct your own investments.
Finally, if you find a new job and you're offered the opportunity to invest in a 401(k) at your new company, you can roll over your current 401(k) funds to your new employer's 401(k) account. This makes sense if you want consolidation, but it's only a good idea if the fees and investment options offered by your new employer's plan are reasonable.
What not to do if you lose your job
Now that you know what you should do after losing your job, there are also a few things you definitely want to avoid, including:
- Badmouthing your employer -- especially online. No matter how bad your employer was, it's not worth posting bad information about them on social media or complaining to others in your industry. And you definitely don't want to bash your past employer when you go to an interview. Other companies you're interested in working for have no way of knowing if the company really was the problem -- or if you were. If they see you publicly badmouthing your old employer, they may worry that they'll be your next target. Making negative comments is also just unprofessional and it burns bridges unnecessarily.
- Breaking legal agreements. If you sign a non-compete or non-disparagement agreement or other legal documents with your current employer, make sure you abide by them. Otherwise, you risk being sued and ending up in a costly legal battle.
- Waiting too long to get health insurance. If you need coverage, you should either sign up for COBRA right away or get coverage through your spouse's plan or an Obamacare exchange. If you wait too long to elect COBRA -- more than 60 days -- you'll lose the chance to continue your employer-provided benefits. So, act swiftly to research your coverage options and decide what's right for you.
- Waiting too long to claim unemployment benefits. Depending on where you live, you likely have limited time to make your claim for unemployment benefits. Don't wait too long and miss out on being able to get these funds to replace part of your wages.
- Losing confidence: You don't want to lose confidence in yourself or your abilities when you've lost your job. You have a ton to offer a new employer. You just need to find the right place for you!
Take these 15 steps after any job loss
Taking these steps after any job loss can help ensure you've done everything you need to protect your finances and jump-start your job search efforts.
By taking care of health insurance, cutting your budget, working on your resume, networking, and making sure you get benefits you're entitled to, you can hopefully minimize the monetary consequences of your job loss and get back to work as soon as you can, without too much stress.