11 Ways to Prepare for a Layoff

Use these expert-approved money tips for a soft landing if you anticipate a job loss.

Medically reviewed in February 2022

If you’re convinced a layoff or job loss is coming, don’t just wait for it to happen. Follow these steps to prepare.

1. Prepare Your Family
Discuss the family’s finances with your spouse and kids—anyone old enough to understand the conversation—and let them know a change in lifestyle might be needed to ensure your financial health.

Try to make it a positive: turn cost cutting into a game and see who can come up with the most ideas to save money. Alter current practices—borrow DVDs from the library instead of going to the movies or subscribing to cable TV. Talk often and openly so each member of the family can contribute and feel like a part of the solution. Open communication also lets family members provide emotional support when one person gets upset.

2. Increase Your Cash Reserves
Start living as though you’ve already been laid off. Take the newfound cash and bank it. Aim for at least a year’s worth of living expenses—and 24 to 36 months is even better. And by “living expenses,” I mean only the essential costs—the bills that must be paid.

3. Examine Your Credit
Apply for new lines of credit—both home equity loans and credit cards. Do it now, while you still have an income. If you have credit card debt, try to lower your rates now.

4. Use Your Health Insurance While You Still Have It
That means going to the doctor or dentist if you’re due for an exam. Have treatments—including surgery—that you have been putting off. Tell your doctor that you might lose your job, so he or she will agree to give you a 90- or 180- day supply of prescription medication before you lose your coverage. If you lose your job, you may have to pay for your own insurance for a long time, so be sure to budget for those premiums.

5. Make Yourself More Valuable
Take on more responsibilities at work to show the company your true worth. Keep a positive attitude even if you’re feeling lousy. And—whatever you
 do—don’t act as though you’re too important to be laid off. Everyone is fair game—even CEOs.

6. Continue to Fund Your 401(k) Plan
But never borrow from it. If you’ve made the huge mistake of borrowing from your plan, repay that money immediately, even if you must borrow the money elsewhere. If you do get laid off, you’ll have 30 to 90 days to pay it back or face taxes and IRS penalties on the unpaid balance.

7. Plan to Negotiate Severance
Since you suspect it’s coming, take the time to research what a fair severance package would be and determine how you will negotiate for it. Start high, based on your experience and years of service, and be willing to compromise.

8. Postpone Nonessential Spending
If you have a vacation, renovation or other nonessential expense planned, cancel it.

9. Take Time Off
If you’re convinced that you’re about to lose your job and you’re unlikely to be compensated for unused vacation or personal days, take those days off now— and use that time to start seeking other work.

10. Keep an Eye Out for Other Opportunities
Refresh your resume and develop your network. Start the job hunt.

11. Remember That You Are Not Your Job
People lose jobs all the time. While a job loss is stressful, it shouldn’t feel like a death in the family. Don’t become too emotionally attached to the company you work for, and don’t link your self-esteem to your job. Business is business. Your new job is getting your next job.

Ric Edelman is Founder and Executive Chairman of Edelman Financial Services, LLC, a Registered Investment Advisor, and an Investment Advisor Representative who offers advisory services through EFS and is a Registered Representative and Registered Principal of, and offers securities through, EF Legacy Securities, LLC, an affiliated broker/dealer, member FINRA/SIPC.

From the book The Truth About Money (Fourth Edition) by Ric Edelman. Copyright ©1996, 1998, 2000, 2004, 2010 by Ric Edelman, Edelman Financial Services LLC Reprinted by permission of Harper Business, an imprint of HarperCollins Publishers.

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