What to do if expecting to be laid off?

[Gilberto de Piento]

In the last six months my job went from solid to 50/50 odds (my estimate) I will be laid off. Partner is in similar situation. Have mortgage payment, no car payment. Have a lot of money invested but very little cash. Haven't looked at our expenses in years. There won't be any severance. Can answer questions about my situation but am a bit privacy conscious. Any suggestions for actions I should take?

[jacob]

The standard advice is to have a 6-12 month emergency fund in cash. I know people hate looking at all that cash doing nothing (although these days, cash savings actually do something for the first time in many many years), but when you need it, you need it (that's what *emergency* means), so it can't be locked up in some ETF, CD, or fund, where it's not accessible. Consider the potentially lost interest payments or extra taxes paid the cost of not having the problem you have now.

Ending up in the retirement account equivalent of "house rich, cash poor" is not all that uncommon in the FIRE space. Somehow "pension or stock rich, cash poor" doesn't really roll off the tongue in the same way but the problem is the same. People are millionaires in their retirement accounts but they struggle to come up with $10,000 for a new car or roof.

In terms of actions: If you actually don't have such an emergency fund, you need to generate cash fast. "Buy nothing". Sell stuff. Divert pension contributions to accessible cash instead.

[loutfard]

Good luck navigating these treacherous waves!

I'm afraid I can only come up with fairly generic ideas. Probably not very helpful. Wouldn't an accurate answer to your question have to be super individual and adapted to your specific circumstances?

Do you want to try and convince decision makers at your job they need you?

Can you cover your financial outflows without this job? Then getting laid off should not be a problem, or even a welcome thing.

Otherwise, I assume you to have a good overview of your liquidity and solvability needs. How to cover them without this job will be the next level of the game I guess. All kinds of super generic advice follow from that:

- lower expenses?
- keep your future savings liquid for the next few months while still at the job?
- build an extra income stream parallel to your job?
- go job hunting?
- ...

[Gilberto de Piento]

@jacob good point, I absolutely need to get a pile of cash built up. I have been avoiding it because I don't want to reduce my contributions but I'm going to do it tonight. I don't think there is another way to do it that is realistic given my environment and will make a significant difference.

@loutfard all good questions. I need to sit down and look at finances but I have very little time for this. I don't know about convincing managers, ill have to think about it. Generic advice is great but I will see if I can add some more personal info.

[jayritchie]

Sorry to hear of your challenged.

If the money you have invested is accessible consider moving to a cash reserve without delay. If that money is tax protected or withdrawal incurs an opportunity cost outside of investment returns search for some specific guidance as to how others in the same position have thought through the pros and cons.

Also - try to best prepare yourself for the worst by finding out all the implications of not paying the mortgage.

[delay]

Sorry to hear that! I'm in the same situation but with perhaps worse odds. Some things I do to prepare:

• Explore alternatives. What other job opportunities are there? This gives you a "Best Alternative To No Agreement" (BATNA)
• I'm a union member, they're experts in redundancies. They tell me what I can expect and what I should avoid doing. Having a source of legal advice feels good
• Firing decisions aren't final until they are written
• Refrain from committing to large expenses, like a holiday, appliance, hobby or house rework
• Review and cancel memberships and subscriptions
• Explore the options for pausing mortgage payments
• Get word out to friends and family

What Jacob said is good advice. When he says 6-12 months, I think that means months of expenses. So what you spend in the last 6-12 months is a good emergency fund. If I had more invested, I'd withdraw that much, and put it into a readily accessible, locally insured (like not Icelandic) bank account.

In the past, I learned that being afraid of losing my job is the worst part. Once I officially got the news I felt relieved. And I try to compare myself to someone with worse luck, like losing health or living in a war zone. Being fired is not the worst that can happen!

[Lemur]

Brush up on resume. Divert equity to enough cash to last during period of layoff (at least). Start the process of fishing for other work now if you still are accumulating financial capital.

Interestingly enough my odds of layoff have also gone up recently. It has lead to me re-evaluating everything (like my portfolio allocation where I just recently increased the cash allocation by a lot and invested in gold for the first time but also thinking about my own buying decisions). Perhaps a blessing in disguise.

[Scott 2]

I'd front load 401k contributions, to ensure you max this year's tax advantaged space, as well as any available matching.

2 people with 50/50 odds of layoff is only 1 in 4 chance of zero income. And then there's unemployment, as well as credit cards. I wouldn't stress over the emergency fund.

If you're confident in the layoff date, and have a medical FSA, I'd look at what happens if you spend the full year's expected contribution early. In my last job, you got it all. So I contributed for Jan and Feb, but spent 6x that money.

Assuming PTO pays out on termination, I'd avoid using it. Alternatively, if not, use it all.

Where do you want to land? An environment with looming layoffs sucks. It might be worth executing the exit strategy shamelessly, including on company time.

[Ego]

Right now you still have access to contacts, software, data, tools and other work related resources that may prove important in your search for future employment. Think about all of the things you might need but will not have access to and secure them if possible. Save any important data like projects you've completed or certifications the company provided. Run reports on your own performance so you have hard data to quote when looking for a job. Contacts made through work could offer future employment. Make sure you have their direct emails, phone numbers or other ways to contact them outside of the company system. In the next few days, find an excuse to reach out to the most likely future employers, or those who could help find employment, so you are in the forefront of their minds. Think about those within the organization who would be willing to offer references and touch base with them.

Good luck.

[2Birds1Stone]

You've been on here for 12 years........so I'm guessing you're somewhat close to being FI? IIRC you hit ~$.5M back at the end of 2021......the markets been bonkers since then, so surely you're close to 7 figures?

Raise some cash, freshen up your professional network, leverage any and all resources you have at your current employers disposal to get the best advantage if you want to jump right back into another job.

Do you and your spouse work for the same employer? If one of you gets canned does it pretty much guarantee the other does too? Can you live off one of your incomes if you stop contributing to retirement accounts/savings?

Even if there's no severance, unemployment insurance should give you a pretty solid buffer for at least a few months.

If you're competent at your job, have a solid resume, put some feelers out there for positions at other organizations preemptively........or ride the wave and enjoy some time off before figuring out what you want your next chapter(s) to look like.

Take this with a grain of salt, I dreamed of a layoff for years before having to quit myself.

[Seppia]

. Save any important data like projects you've completed or certifications the company provided.

A good recommendation, I would add a disclaimer to be extra careful not to be clumsy in doing this.
Absolutely DO NOT start downloading stuff indiscriminately onto usb keys or similar, as it will raise a gigantic red flag and dramatically increase your chance of termination (potentially for cause, if you were not supposed to download whatever you downloaded).
Sorry if the above was obvious, but I’ve seen more than one colleague get canned specifically for that.

[Henry]

Ending up in the retirement account equivalent of "house rich, cash poor" is not all that uncommon in the FIRE space. Somehow "pension or stock rich, cash poor" doesn't really roll off the tongue in the same way but the problem is the same. People are millionaires in their retirement accounts but they struggle to come up with $10,000 for a new car or roof.

Speaking for myself, I get rid of money by putting it into investable assets as an action/habit to militate against my old habit of spending it. So I too perpetually find myself in this boat. In real estate, it's expressed as "What am I going to do with all this money. I need income." For me, it's this $350 is a TSLA share that will be worth $1000 in 2027. If I'm right or wrong doesn't ultimately matter because from a utility standpoint, it's inaccesible at the moment. In this sense, I'm a victim of the retail investment military/industrial complex.

[Gilberto de Piento]

Thanks for all the help! I appreciate it. Sorry I haven't been able to reply back. I am cash poor and time poorer these days.

I haven't looked at my finances in a few years. I started looking into how much money I need and what spending could be cut. I need to put more time into that.

I set my investment contributions to $0 this morning. This will result in about $2000 per month in cash. It will take a while to build up a substantial amount.

[jennypenny]

Do you have enough home equity to open a HELOC in case you need it? (do it while still employed for better rates)

Make sure you are up-to-date on medical and dental check-ups if your insurance is through one of your employers.

[Gilberto de Piento]

You've been on here for 12 years........so I'm guessing you're somewhat close to being FI? IIRC you hit ~$.5M back at the end of 2021......the markets been bonkers since then, so surely you're close to 7 figures?

...

Do you and your spouse work for the same employer? If one of you gets canned does it pretty much guarantee the other does too? Can you live off one of your incomes if you stop contributing to retirement accounts/savings?

"You've been on here for 12 years" I failed at FIRE, sorry y'all.

I have about $1m in assets but how useful those assets are varies. I need to look into the rules of each account in more detail. I've got about $200k in stocks in a taxable account. Those I could sell as needed though there would be taxes to pay and are more or less useful depending on market fluctuations. I have about $500k in stocks in a tax advantaged account. I need to look up the rules on how that one works if I wanted to withdraw. About $1-200k is in an old pension that I also need to look up the rules for. My recollection is that it is set up to really discourage withdrawals before age 60 (I'm far from that). I can't even make sense of how much money is in there right now. I have about $150k in home equity.

The money that is more accessible is probably $700k. Using the 4% rule that might produce $28,000 per year, minus taxes. I looked at my 2024 expenses and they were $41,000 so there is a significant shortfall. Also, if I lose my job we would also have to start paying for health insurance (not available through partner's employer). Some of that $41,000 is on the fixed side (mortgage, property taxes) but some of it could be stopped if necessary. I need to look at it in more detail. I suspect we could cover the shortfall by making some reasonable cuts. I also think odds are decent that I could get a more basic job and cover the shortfall provided everyone else is also not laid off and trying to get those jobs.

We don't work for the same employer but our fields are economically very correlated. Yes, could live off either income if we stopped contributing to retirement/college fund and cut expenses. I need to do some math to get the details on all this.

[guitarplayer]

I looked at my 2024 expenses and they were $41,000 so there is a significant shortfall. Also, if I lose my job we would also have to start paying for health insurance (not available through partner's employer). Some of that $41,000 is on the fixed side (mortgage, property taxes) but some of it could be stopped if necessary. I need to look at it in more detail. I suspect we could cover the shortfall by making some reasonable cuts. I also think odds are decent that I could get a more basic job and cover the shortfall provided everyone else is also not laid off and trying to get those jobs.

Why don't you get a more basic job now

you are not counting on a severance package anyway
it would likely give you some insurance cover
you would face little competition before potential lay offs
it being a more basic one allows you more brain space to think about other stuff
you are already well-to-do with $1M

As to 'brain space for other stuff', in the first instance I would tackle

reducing expenses, for example organising cheaper housing -> buying a place for less money / renting and with lower property taxes
reducing other expenses too, $41,000 generally is a lot of money to spend per year*
after the two above, coming to the realisation that $1M is plenty, reinforcing the idea of the more basic job being the way to go

*I gather that US is cheaper than UK and I count about $25,000 for two people, safety margin included.

Also, even though not accessible, with the savings you have you can easily take some sort of loan if emergency strikes. You would pay some interest, but I would not worry about it as in the grand scheme of things you are well to do. If emergency does not strike, just build emergency fund. I think interest on any short term loan would be a reasonable price for quick access to cash in the face of actual emergency and not having easy cash available due to temporary lack of foresight.

As always in the financial middle world, greatest leverage is in reducing expenses. Life is brilliant on the cheap, best things in life are free.

Good luck!