Until the global panorama, it didn’t occur to me that you could just…lose your job for no reason (and by no reason, I mean, layoffs, budget cuts, projects ending, etc.). But when the world changed overnight, it became obvious to me how little control we all really have over our own employment—and I was like, Oh, shit, you mean when your company starts bleeding money there’s a chance they’ll cut you loose? Well, that ain’t good.

And ever since then, I’ve lived with this undercurrent of fear that—at any moment—something in the economy could shift dramatically and leave me without a paycheck. While this is likely a fear that everyone with gainful employment experiences, I’d postulate it’s more intense in the US, where your healthcare, retirement savings, and ability to pay for childcare are all tied to your employer. It’s a high-stakes arrangement, right? That’s enough to induce fear in anyone, regardless of how good you are at your job. 

So whether you’ve recently lost your job (or fear that you may for some reason), I wanted to put together a bit of a thought exercise: How to rationally approach a serious, scary situation to lessen the financial and emotional toll I imagine it takes. 

First things first—let’s usher the elephant out of the room

Yes, you are likely aware that you should already be searching for gainful employment elsewhere. We’re not really going to focus on the new job search—just the financial checkboxes you can start ticking off if you’re stressed about job loss in any capacity. 

And on that note, I apologize if any of this feels obvious to some of you, but I figured it made sense to round all of our bases and leave no stone unturned. Analogies abound.

For the purposes of this post, we’re going to assume there’s no juicy severance package or short- or long-term disability pay associated with the job loss—we’re assuming that for whatever reason, you’ve found yourself without the income you can typically rely on. 

That means the first thing you should do is look into applying for unemployment benefits in your state. This was a life raft during the pandemic when unemployment benefits were increased, but if you’re looking around at your savings coffers while doing these exercises and you’re only seeing cobwebs, it makes sense to apply for unemployment. Of course, there’s no guarantee you’ll get it, but it’s there for a reason—and you can get it even if you were let go with a severance package. Your tax dollars fund it. Use it!

Step 1: Analyze your environment. 

That’s a fancy way of saying: Figure out what you’ve got. Do a little inventory of your balance sheet and nail down a few numbers, primarily: How much do you have in cash readily available to you? 

This is probably going to be in checking and savings accounts, but it also might be cash that’s earmarked for things like emergencies, weddings, home improvement projects…and it can feel sketchy to start dipping into funds that were supposed to be for something else. I would note that you have it on your imaginary inventory list, but add caveats wherever savings were already dedicated to something else, and think of those as “last resort” options if absolutely necessary.

The other part of this analysis is figuring out what else you’ve got coming in. If you’re part of a partnership with combined (or pseudo-combined) finances, losing one job may not mean it’s all-hands-on-deck panic time. Same goes for if you’ve got side hustle income that can help eat up some of your impending expenses. 

On that note, a goal to strive for if you’re in a couple: The best way to insulate yourselves from job loss and compensation downturns is to live on one post-tax salary, and ideally, the lower salary. Why? Because even the higher-paying job is lost, there wouldn’t be a disruption in spending. That’s not always easy, though; for transparency, my husband and I are only about two-thirds of the way there in our own home. 

To summarize, in anticipation of (or immediately after) job loss, we’re taking stock of (a) what we have in cash already, and where, and (b) if there’s any other income coming in, and how much. 

Step 2: Calculate your runway.

This is where all the badgering I’ve done over the years to try to get you to figure out “how much your life costs” comes into play. We need to figure out how much heavy lifting our cash on hand needs to do (after all, if you’ve got side hustle income or another earner in your home who can cover some or all of the costs, you may not need to use much of your savings at all). 

We want to calculate how many months we have based on our current spending patterns. This mostly includes things that cannot be easily “behavior-changed” away—your rent or mortgage, utility bills, basic groceries, doctor’s appointments…stuff that’s more or less necessary even if you’re playing life on “Austerity Mode.” 

For those of us with the privilege of discretionary income, I’d venture a guess that not all of your spending every month is necessary, which brings me to step 3…

Step 3: Identify the costs we can cut.

When I think through our joint budget of $7,500 per month, there are a few major areas I recognize right away as opportunities to trim with reckless abandon:

• Cleaning ($200/month)

• Travel and the associated pet care (roughly $300/month)

• Meal prep service ($1,000/month)

• Restaurants ($400/month)

• Shopping and miscellaneous (call it $200/month or so)

Right there, that’s about $2,000 each month that I can just eliminate, shaving our budget down by about 25% to $5,500/month. 

Now, would I be happy to forgo these luxuries? Well, no—but I know I could if I needed to throw that ass in gear. The other big things (like rent, electricity, groceries, etc.) have to stay put, but my weekly takeout habit can go. 

This exercise should help you understand how far your existing cash cushion and/or other streams of income can be stretched once you “trim the fat,” but it brings me to my next major point…your liabilities.

Step 4: Think of any liabilities.

Look, I’m not saying you have to do anything drastic because you’ve lost a job. But if for some reason you feel concerned that it might be awhile before you get another one, or your existing cash cushion is relatively slim and you don’t have too many discretionary expenses to cut (because let’s be honest, having a ton of discretionary expenses in the first place is a pretty privileged starting position), it might make sense to look to your liabilities.

Do you have any remaining student loans in forbearance that you’ve been paying down anyway, that you could pause payments on? Could you consolidate credit card debt to get a lower interest rate and buy yourself more time? Do you have two cars in your household, and the ability to drop down to one? (With the thought being, you may be paying off two sets of car payments and car insurance and really only need one.)

The idea is, where can you offload liabilities? Maybe you’ve got a mortgage that’s a little steep, but you can rent out an extra room to a friend as a roommate and recoup some of that payment in rent. While Step 1 was about assessing cash on hand, this step is about looking around and figuring out…where are my current assets or liabilities either holding me back or providing an opportunity? 

Step 5: Figure out health insurance.

This one honestly irritates me, but alas, here we are (and by “here,” I mean: not in one of our peer nations where healthcare is considered a human right—but I digress). 

Was the job in question providing you or your family health insurance? This is something we don’t often think about until it’s too late, but determining your risk tolerance around going without insurance for a little bit is probably wise. 

Ideally, your spouse or partner is still employed and you can get on their coverage (or maybe you already were on their coverage!), but if that’s not an option, you may want to get a cheap marketplace plan in the meantime for catastrophic purposes like, if you required a procedure or service that would be financially ruinous otherwise. (In some states, there’s a penalty for not having health insurance.) 

So like…maybe try to lie low and table the extreme sports until you’re back on that late-capitalist, for-profit, employer-provided private healthcare. (sighs loudly)

Step 6: Check in with your mental state.

You never know how you’ll react to being laid off. Do an emotional assessment and see if there’s anything you can do to take action that’ll make you feel better. I know that—for me—I’d probably want to retain a sense of control. 

I’d probably be consolidating all of my cash in one place so I could keep track of it easily. I’d probably sell items that I didn’t need. If I still had a high balance on a credit card from when I was employed, I would look at doing a balance transfer to a credit card with 12 or 18 months of 0% introductory APR, so I knew I could buy myself some time and not have to pay it down immediately to avoid interest charges. (Note there’s usually a ~3% fee for doing so, but depending on the balance, it could be well worth it to buy the time and avoid the immediate interest and urgency-fueled stress.) 

The other thing to assess at this step is…do I want to rush back into the job market if I don’t have to? If you step back and assess your cash position and outgoing expense needs, you might find that you have quite a bit of runway and may have the freedom to think about this like a mini sabbatical. Even if the job loss was unexpected, if you’re in a financially secure position, it may be a blessing in disguise. 

I remember one conversation with an architect who found herself without work and decided she didn’t want to return to “white collar” America. Instead, she got a job in a local coffee shop that paid most of what she needed to pay her bills, and used her savings to supplement the rest for a little while, thereby extending her “savings runway” by quite a bit—she described wanting a change of pace and to do a job outside of the “knowledge work” sector. This could be a time to reinvest in yourself, depending on what your financial audit unveils—go back to school, get certified in another field that interests you, etc.

In conclusion…

If you’re feeling scared because the “worst case scenario” has already happened, or you’re just trying to prepare for the worst because you’re getting funky vibes from your boss Carol and you don’t want to risk it, know that your feelings are valid, natural, and—honestly—helpful, if they’re the reason you’re reading this blog post right now. 

At the very least, enacting these steps (whether before or after you’re faced with termination) will give you the two things that help most during times like this: security and control. (And hey, if you can coopt the unfortunate circumstance into the whole “sabbatical” thing…send pictures from Copenhagen, please. Word on the street is they’ll give you free healthcare.)