Getting laid off is never fun, whether you’re prepared for it or not.
I’ve been laid off twice. The first time was unexpected and very financially troubling. The second time, I was far more prepared and was able to relax, take my time, and find the job of my dreams.
Keep in mind that being laid off is largely a business decision, not a knock to your personal worth.
So how do you financially survive a layoff? Or better yet, be well-prepared in advance should you ever become laid off? As the old adage goes, “The best time to plant a tree is 30 years ago, the next best time is right now.”
Are you ready to invest?
One of the most frequently asked questions in the BiggerPockets forums is “How can I start investing in real estate with no money and bad credit?” The answer? You shouldn’t. You need to fix your situation and invest from a position of financial strength.
Three things to tackle immediately
If you become laid off, there are a few things you need to tackle immediately, even before the shock wears off. Why? So you can lock in your benefits now and reduce your “burn rate” on your reserves, especially if you don’t already have six months of reserves set aside.
- Apply for unemployment. Your employer should be able to tell you if you qualify for unemployment benefits, however, it’s worthwhile to go home and immediately apply. Depending on your state, it can take two or more weeks to get your first check, but your benefits will likely be based on the date of your application.
- Understand your full “package.” If you were presented with a severance package, don’t be in a rush to sign it. There may be strings attached to it to receive it (you can’t work for a competitor, you can’t sue your former company, etc.). Immediately make an appointment to discuss your package with your lawyer to understand the legal and tax implications of taking any severance package.
- Contact your coworkers. Let them know you have left the company. As my former mentor says, you want to own the story. When you reach out to your coworkers, let them know you would like to stay in touch and ask if they would be willing to write a reference for you on LinkedIn and for applications. Whatever you do, do not bash the company, engage in gossip, or violate the terms of your layoff agreement in any way.
Lastly, while you may be tempted to sleep in and take your foot off the gas pedal, once you have steps one through three done on day one of being laid off (yes, day one), it’s now time to create a schedule for yourself. Consider picking up a copy of Hal Elrod’s The Miracle Morning to help you establish an amazing morning routine and own your mindset.
Reduce your burn rate ASAP
As counterintuitive as it may seem, doing what you can to reduce your burn rate in the first 48 hours will help you begin to come to terms with the new reality of being laid off and perhaps let you extend your savings (if you have any) for much longer than originally intended. And if you aren’t laid off, the ideas below are just great habits to adopt to help you save some cash for that next down payment.
Cut any destructive spending immediately
These expenses might seem to help you cope in the short-term, but in the end, they will derail your health, finances, and path forward in life.
- Retail therapy
- Fees and penalties for not paying bills on time
Reduce all unnecessary lifestyle expenses
- Dining out
- Excessive grocery bills
Eliminate monthly subscriptions
- Magazines. Check out your local library for free online magazines
- Wine/beer/alcohol clubs. Save your body and mind (and sleep better!).
- Clothing clubs. You aren’t going to be in an office right now. Get a nice suit to interview in if you don’t have one and then save your money.
- Razor clubs.
- Expensive gym memberships. Strike a balance here. Keeping in shape (and sane) is super important for you right now. Spending money on things you don’t need isn’t.
- TV streaming services. Try swapping out hours of endless television (if you haven’t already finished Netflix during COVID-19) for reading to develop your communication and business skills, read faster, or learn a new trade.
- Meal delivery subscriptions. This is a great opportunity to learn new recipes, cook up some meals from scratch, and stash them in the freezer.
Renegotiate your household bills
Now that you have a little bit of time, set aside three to four hours and make some calls to renegotiate your bills and lower your overall expenses (permanently!).
- Car insurance. My personal favorite is GEICO because of all of the discounts I can get. Also, check here to see a full list of inexpensive providers. It is very helpful to have a clean driving record and good credit to get great rates.
- Home insurance. I personally got a Costco membership and slashed about 45% off my home insurance policy and 50% off my term life insurance policy.
- Phone bill. Check out US Mobile or Mint Mobile for some great low rates.
- Cable bill. Work to cut the cord or ask your provider for a promotional rate and bundle your internet.
- Outstanding bills. Renegotiate your loans and credit card payments before you miss a payment.
- Fees on past-due bills.
Renegotiate your interest rates
Review all of your credit cards and loans now and negotiate the interest down to the lowest rate possible on the off chance you burn through savings and have to use credit to survive (let that credit be as cheap as possible!).
Sell things for cash
Once you have a good handle on the points above, set aside time to clean out and sell items you don’t need or want anymore and pad your savings account, such as clothes, coats, shoes, and large gear items.
Make your move
Now that you have reduced your burn rate and created some breathing room, it’s now time to get down to business and figure out your next move.
Take inventory of what you want to do and build your network
It’s not what you know but who you know that will land you that next great career move. Proximity is power. Grab a copy of The 2-Hour Job Search from your local library and methodically work through the process. (Spoiler, it takes more than two hours!)
This book will help you take inventory of what you like doing, what you are good at, how you want to work, and how to craft a networking plan to land that job that isn’t even listed yet. For added inspiration of the power networking, grab a copy of The Third Door.
Overhaul your resume and online presence
If your resume hasn’t been updated in the last five to 10 years, you should know that bullet points of projects aren’t going to cut it anymore. Companies want to know the impact you have created, so you have to learn how to market yourself. Check out a copy of Guerilla Marketing for Job Hunters and get to it. This book will help you identify all the ways you created value at your previous jobs and create a resume that will tell the story of your true value.
Use this time to create personal development habits
Now is the time to add more tools to your toolbelt and to develop great personal development habits. Maybe you need to learn new skills for your next career path via a site like Khan Academy, LinkedIn Learning, Udemy, or MasterClass. Or perhaps you need to bust through some limiting beliefs (try the book Limitless by Jim Kwik). Regardless, you can never go wrong brushing up on communication and priority management skills.
Once you have steps one through three identified, schedule time daily to execute your outreach and personal development plan like it is your new job.
Getting unexpectedly laid off sucks. Just remember, don’t take the layoff personally, guard the doors of your mind and self-talk, and keep your body healthy.
Smart financial solutions
There are some other things for you to work on during this time that will propel your financial situation forward.
Roll out your former 401K into a self-directed environment
This will help you invest in assets you can control (psst… real estate!).
Build your financial moat
As soon as you land your next job, and put a plan into action to never let this stress happen again.
- Build up your emergency accounts. Build up cash reserves to cover six months of all expenses plus your insurance premiums for health, home, and car.
- Lower your interest fees across the board. Look to refinance your mortgage, car loan, or investment property loans to take advantage of historically low interest rates.
- Reduce/eliminate the fees you pay on investments like stocks, bonds, and mutual funds. Reducing fees by just 1% can save huge amounts of money in the long run.
Lastly, build multiple passive streams of income so one day work can become optional for you as you continue your adventure toward financial independence and freedom.
More personal finance on BiggerPockets
A great credit score, some cash in the bank, and strong stable income can be invaluable assets for those looking to begin or add to their real estate portfolio. For a more in-depth discussion and debate about best practices in personal finance, you may want to check out the Personal Finance Forum.