The Laid-Off To-Do List

One listener asks Dave to rattle of a list of things to do and look out for when you get laid off, such as how to work a budget and handle your 401k.

QUESTION: Listener asks Dave to list things they should do when they are laid off. Dave doesn’t have a list, but is happy to give recommendations.

ANSWER: I’d say the first thing you do when you are laid off is you take your severance and put it in a pile and call that your emergency fund. Don’t pay any extra on any debts and stop adding to retirement and college accounts. Do a detailed budget of your household and cut your lifestyle to nothing, so your emergency money will last as long as possible. A lot of people don’t cut their lifestyle because they are already hurting, and don’t want the pain of a cut budget to go with the pain of losing their job.

As far as insurance goes, be on the hunt for life insurance if you had your insurance at the company. For health insurance, get a high deductible health savings account with a low premium.

For a 401k, roll them out directly into an IRA with a direct transfer rollover. If you have them send you a 401k check, they will withhold 20% on you. You only have 60 days to put in 100% of the money, but you only have 80%. Don’t cash out a 401k except to avoid bankruptcy.

Also, don’t be afraid to take part-time gigs to keep money coming in while you are looking for the permanent career change that this represents.