Contingency Planning Scenario: Unexpected Job Loss and Budgeting

By Brenda L. Peterson, The Layoff Lady

The Value of a Backup Plan

Career Resilience is all about being ready to deal with what comes. Thinking through scenarios, or contingency planning, is one way to prepare for possible outcomes. By thinking through your next steps before you are in that situation, you can ensure that you are better prepared for whatever does come to pass. 

After seven layoffs, I know the importance of ensuring my financial security. Here are my best practices for preparing for a possible job loss.

The Scenario: Unexpected Job Loss

What would you do if you went to work tomorrow and found out it was your last day at work? If you've never had this experience, this prospect might be almost unthinkable. Let's take a few minutes for you to think through how this change might impact your life. Here are a few key areas you would need to address. 

Budget Implications

Once you find out your job is ending, you'll need to figure out how to pay your bills without what may be your main income stream. You would need to find out about any final money you would receive from your employer, including your last paycheck, a vacation payout, and maybe even some kind of severance package. You would also need to explore other possible money you could access to pay for your main expenses until you could find a new job. This might include unemployment payments or your savings. 

In addition, realize that your health care coverage might end with your job. You will need to determine how you will pay for any health-related costs. This could include switching to a family member's plan, finding and paying for other health care coverage, or determining how to handle possible health care costs outside of an insurance plan. Each of these options has a different price tag and level of risk.

Budget Questions To Ask Yourself

Ask yourself these questions about your current budget for your household:​​

• How much might I receive in unemployment insurance (UI) income on a weekly basis? 
• How closely do my current expenses line up with what I might receive from UI income?
• Which expenses might I minimize, pause, or eliminate to more closely align my income with my expenses?
• How might I pay for my remaining regular monthly bills?
• How will I manage health care costs? What insurance options are available? What are those costs?

How much money do I need to pay my current regular monthly expenses?

Possible Contingency Planning Steps

hile all of these questions might seem big and scary to contemplate, remember you're not in that situation at this time. Right now is a good time to do some research and preliminary thinking on how you might manage each of these factors. Consider doing the following to help inform your contingency planning:

Your Income 

• Review your previous month's bank statements. Identify how much you earn in a given month.
• Look up unemployment insurance (UI) benefits in your state. Find out how much you might receive if you were laid off by your employer and how long UI benefits last.
• Think about benefits you have from your employer that you would need to replace if your job ended and associated costs.
• Think about possible income streams you could create outside of your paycheck from your job. 

Your Expenses

• Review your previous month's bank and credit card transactions. Identify how much you spend in a given month. 
• Think about how much additional money you would need to pay your regular bills if the income from your job ended.
• ​Look through your monthly expenses. Identify which you might minimize, pause, or stop altogether if you were unemployed.
• If you have healthcare through your employer, consider where else you could get healthcare.  
• Review healthcare costs through Healthcare.gov and estimate your possible costs.

Your Savings​

• Review your previous month's bank statements. Identify how much you save in a given month.
• Look at your balances on your savings account(s). Think about how much savings you might need to use to pay your basic monthly expenses for the next six months in the event of a job loss. ​

What Do You Think?

What questions do you think you need to focus on as you do your contingency planning? Share your thoughts in the comments. 

Learn More

• Unemployment Benefits (and How To Apply) by US State
• Healthcare.gov: Health Insurance Options if You Are Unemployed
• The Layoff Lady: I Just Got Laid Off--Now What? ​