) – When you are firedyou are not going to be in the clearest frame of mind to take care of your financial life.
It can be challenging at first to do just about anything, says Pamela Capalad, a New York-based certified financial planner. “But you have to deal with the financial stuff.”
To safeguard your finances, consider the following first steps.
Secure your HR contact
“Before you walk out the door, and companies can say you’re out in five minutes, make sure you have a contact,” says Andrea Kay, Cincinnati-based author of “Work’s a Bitch and Then You Make It Work.” ” and various other career books.
Having someone to connect with at your former employer, like a human resources professional, will be crucial if you need help renewing your 401(k) retirement plan, or if there’s a problem with your severance pay.
Find out if there will be compensation
Your employer may or may not offer compensation. Depending on the company and the laws in your state, this could include severance pay, as well as any other paid time off you were entitled to. Like other forms of income, severance pay is subject to income tax.
When online payment company Stripe laid off about 14% of its staff on November 3, it offered 14 weeks of severance, and more for those with a longer tenure. The severance package also included the 2022 annual bonus and payment for all unused paid time off.
The compensation could even be negotiable, experts say. Consider applying for additional severance pay, career services to help you find your next job, reimbursement for unused paid time off, an extension of health insurance coverage, or immediate vesting of unvested stock options.
Why would an employer agree? Well, severance is often provided because an employer wants employees to sign a release of claims against an employer, a non-disclosure agreement, or a non-compete agreement.
“They need you to sign something, so you have a bit of leverage to negotiate,” says Capalad, who is also the founder of financial planning firm Brunch & Budget.
reduce spending
Experts also suggest cutting discretionary spending immediately. Focusing on the essentials (food, housing, and utilities) until you land your next gig can help reduce financial strain. maybe you can reduce on subscription services, eating out and other extras.
If money is still tight after those cuts, consider negotiating your bills with service providers and lenders. A phone call to 211 (or a visit to 211.org) can connect you with social service programs that can help keep you afloat.
Unemployment file
Unemployment insurance offers weekly benefits to workers who are laid off. If you are laid off, file unemployment insurance as soon as possible, as it can take weeks to receive your first check.
To qualify, you must meet the work and salary requirements, which is the time worked and the amount you earned. It is possible to receive unemployment benefits if you also receive severance pay, but the rules vary by state.
To access unemployment benefits, you must file a claim in the state where you worked, according to the US Department of Labor. The state unemployment insurance agency where you live can provide you with information on how to file your claim in another state. Find your state’s unemployment benefits on the CareerOneStop website, sponsored by the Department of Labor.
Expand or find a new insurance
Find out when your health insurance will end. In some cases, an employer will offer to cover health care expenses. for example when Goal (owner of Facebook and Instagram) laid off more than 11,000 employees on November 9 and promised to cover the health care costs of laid off employees for six months.
Under a federal law called COBRA, workers can extend their health insurance coverage for a certain period of time if their employment is terminated. For covered employees, that time period is 18 months.
To get insurance under COBRA, you will have to pay the premium, which can be expensive. Insurance on the HealthCare.gov marketplace may be cheaper than COBRA, especially if you qualify for Medicaid.
Beyond health insurance, if you had life insurance tied to your job, it’s unlikely you’ll stick with it when you’re laid off. That could leave your loved ones hanging.
“If you’re 23 and healthy, you don’t necessarily need life insurance, but if you have a child or care for a partner or family, now is the time to buy life insurance,” says Capalad.
Manage your 401(k)
If you had a 401(k) with your employer and were fired, you have four possible actions you can take:
- Roll your old 401(k) into an individual retirement account or IRA. You’ll owe taxes on the amount rolled over if it’s a Roth IRA, but taxes are deferred if it’s a traditional IRA.
- When you get a new job, roll over your old 401(k) to a new plan. Contact the plan administrator at your old job and request a direct transfer.
- Let your 401(k) be. You may pay higher rates as a former employee and cannot make additional contributions.
- Withdraw your 401(k). Your former employer may give you a check, but they will withhold 20% tax on the distribution. An early distribution could also be considered, which carries a 10% penalty and possible taxes.
Exercise your stock options
If you have vested and unexercised employee shares in your former employer, you must make a decision soon to exercise. There will be a predetermined window, usually 30 to 90 days, Capalad says, to exercise them; otherwise, they will be returned to the company. Unpurchased shares are no longer part of your portfolio.
However, it is also possible that an employer could use what is known as a recapture provision to buy back your purchased shares after a triggering event, such as a layoff.
Take some time before you start looking for a job, then dive in
Your first impulse when laid off may be to start looking for a job right away. Kay says that’s not an ideal way to start the search for her.
“You’re going to want to react by calling everyone you know and saying ‘Do you know any jobs?’ Wrong move,” says Kay. “You’re going to want to send your resume right away, worst move. Don’t do anything except take a deep breath first.”
After that exhale, assess your own experience and skills so that you have something to talk about with the people in your network.
“You need to know why you matter. You have to say ‘this is what I’ve done for my company and this is what I’m going to do for you,’” says Kay. And it helps if she can present why it’s important in a simple, jargon-free way.
“You have to be able to explain it to your mom,” says Kay.
Once you understand what you can offer and how best to introduce yourself, Kay recommends using that information to update your resume, build your LinkedIn profile, and submit job applications.