For many workers, job security is a priority amid mass layoffs at major companies. Last month was the worst October for layoff announcements in more than two decades, according to global outplacement firm Challenger, Gray & Christmas. Additionally, the current government shutdown, now the longest on record, has left thousands of federal employees laid off or working without pay.
It’s never a good time to lose your job, and you may not know if a layoff is coming. However, there are some steps you can take now to protect your financial security in the worst-case scenario.
If you’re worried about a possible layoff, don’t wait until bad news hits you to take action. There are steps you can take to prepare yourself for overcoming a period of unemployment.
1. Know your rights and benefits
Understanding your rights after losing your job and knowing what benefits are available to you can help ensure you get everything you are entitled to.
Review your employment contract to find out what happens to your insurance benefits upon termination, whether you will continue to have access to employee benefits once your position ends, and whether you are entitled to a severance package.
You should also visit your state’s unemployment website, as each state has its own eligibility and filing process. Learn more about waiting periods, required documentation, and benefit amounts (and how long they last).
Once you have this information, you can make a plan of action in case you lose your job.
2. Review your budget and have a backup plan
Start by reviewing your current monthly expenses and income. You can use a budgeting app or Excel spreadsheet to classify expenses into fixed and variable expenses. This will give you a clear idea of ​​where your money is going right now and where you need to reduce it.
Once you know your baseline, the next step is to create an adjusted version of your budget that you can immediately switch to if your income were to decline. This version should focus entirely on covering essentials like housing, food, transportation, insurance, and minimum debt payments.
In this lean version of your budget, cut back on discretionary spending like subscriptions, gym memberships, dining out, or streaming platforms. The goal is to identify the absolute minimum you need to live comfortably while looking for a job.
While job loss is never ideal, knowing your numbers and having an alternative budget ready can help you make more informed decisions about how to use whatever income and resources you have more effectively.
Read more: Your Complete Guide to Budgeting
An emergency fund provides a financial cushion when something unexpected happens, whether your car breaks down, you experience a medical emergency, or you lose your job. Many experts suggest keeping at least three to six months of living expenses in an emergency fund, but you may want to aim for more to give yourself more breathing room in case it takes you several months to find a new job.
The exact amount you can comfortably contribute to your emergency fund each month will depend on your particular circumstances. But one way to help your balance grow faster is by putting your money in a high-yield savings account, where you’ll earn a competitive interest rate.
Read more: The 4 Best (and Worst) Places to Store Your Emergency Fund
Making debt repayment a priority is never a bad idea, but it’s especially important if you’re worried about a possible job loss. Monthly payments and interest charges eat into your hard-earned income, which could be better used to cover your essential needs.
By making extra payments on your debts now, you’ll reduce the amount you owe, pay less interest overall, and be free of those payments months or years sooner.
You should also review the terms of your existing debts to see if you can get a lower interest rate by refinancing. It’s also worth checking with your loan provider or credit card company to see if they offer any hardship assistance or forbearance programs if you can’t afford to make your payments.
Read more: What is more important: saving money or paying off debt?
Having more than one source of income ensures that your financial security is not limited to just one job. Now might be a good time to take inventory of your professional skills, certifications, and hobbies that could translate into income-generating opportunities.
For example, even if you work full time, consider testing the waters with a freelance job that could turn into a reliable income later, such as writing and editing, graphic design, virtual assistant or administrative support, accounting, tutoring, or consulting in your field.
Just make sure you don’t violate any rules your current employer has about working outside of work. And be sure to keep detailed records of your secondary income and related expenses, as you’ll need this information when you file your taxes.
Read more: How to Make More Money with a Side Job: 6 Tips for Success