Friday, July 17, 2009

A Survival Kit for Layoffs and Unemployment

As Updated June 5, 2011

Someone who has just been laid off will suddenly have a lot of things to think about. With the world spinning out of focus, it will be hard to keep them all straight. Here's our survival kit for the jobless. It may not cover all the issues that would be important to any particular person, but will hopefully serve as a useful guide in difficult circumstances.


When leaving your old job, make sure you get everything you're entitled to have, and negotiate for as much else as you can. Here are some typical issues.

(a) push for as many weeks or months of termination pay as you can get;

(b) ask for payment of any bonuses, awards or commissions you’ve earned or accrued, or which you can reasonably expect based on your job performance to date (if the award was in non-monetary form, like a trip to Hawaii, ask for the monetary value of the trip);

(c) request payment for accrued vacation and sick days, and any other time off you've earned or been awarded;

(d) ask for continuation of health insurance benefits (remember that you have COBRA rights to retain your employer’s health insurance for 18 months even if your employer doesn’t offer anything else; even though you’d have to pay the entire cost of COBRA coverage yourself, it's still worthwhile); also see our discussion of health insurance further below;

(e) ask for continuation of other insurance benefits, such as dental coverage or life insurance;

(f) obtain a written statement of the balance in your 401(k) account and any other retirement accounts you might have with the employer, such as an employee stock option plan--the assets in these accounts are yours (except possibly for matching funds from your employer if you haven’t had the job all that long) and you don’t have to negotiate for them; but you should make sure you know how much is there;

(g) claim any stock options, restricted stock and similar incentive compensation benefits that you have earned or are entitled to;

(h) ask about retaining any employer provided equipment, such as a laptop computer or a car, if this equipment is important to you;

(i) ask for the employer’s agreement not to contest your claim for unemployment compensation (if it looks like you’d qualify for unemployment comp);

(j) ask for your employer’s agreement to give you a good reference (or at least a neutral reference such as only a confirmation of dates of employment and positions held); and

(k) ask your employer for assistance from an outplacement or headhunter firm (that the employer pays for).

Your ability to obtain these benefits will depend on the circumstances of the situation, but they are something for you to think about. Certainly, if you don't ask for them, you probably won't get them. If you are represented by a union, consult with a union representative about your rights and options.

Some people try to negotiate for a temporary continuation of employment while they search for a new job, on the theory that it’s easier to find work if you are employed. Others may aim for the use of an office and telephone line at the old employer’s office while they search for a job, to maintain the appearance of being employed. You may want to consider these possibilities. But don’t lie to a prospective employer about your actual employment situation.

Carefully read anything your employer asks you to sign in connection with your termination. Almost always, an employer offering termination benefits will ask you to waive your rights to sue for discrimination, wrongful discharge and other potential legal claims or rights. If you’re seriously considering a lawsuit, don’t sign anything even if that means losing some of the termination benefits. You should be able to use COBRA rights to maintain your health insurance (unless you’ve engaged in “gross misconduct”). If you sign a document that waives your COBRA rights, you can still revoke that waiver for a limited period of time (which should be at least 60 days after your regular employer sponsored health insurance plan’s coverage ends). The assets in your 401(k) or other retirement accounts are yours in any event, so you don’t have to waive any rights to get them.


Apply for unemployment compensation if you think you qualify. Unemployment comp will help you extend your financial resources, and is a modest but valuable benefit. State government agencies administer the unemployment compensation program, so go to your state's website for details.

While you should diligently search for a new job, you'll probably have some down time. Do part-time and temporary work. Even a few dollars coming in the door will help. And don't forget the psychological value of working. Even if it isn't high-paying or permanent, a part-time or temporary job gives you the dignity of work. Maybe that sounds corny, but those unlucky enough to be laid off know it's true.

Consider selling stuff you don't use any more. This isn't likely to bring in much money, but unneeded possessions become a burden. Why not get rid of the burden and bring in a few bucks?

Check to see if you have unclaimed money from old bank accounts, uncashed checks and other sources. See

If you're really scraping the bottom of the barrel, keep in mind your community's food banks, food pantries, and soup kitchens. In addition, you may qualify for food stamps if your income falls enough. It may be difficult to use these resources. But if you and your family get hungry enough, keep them in mind. The food stamp program is federally funded but administered by the states, so check your state's website for details.

Also remember that welfare programs still exist. Although the controversial federal Aid to Families with Dependent Children program closed back in 1997, the federal government provides funding for state welfare programs. Check with your state website for details. Most of us would find it difficult to accept welfare. But if you find yourself surrounded by rocks and hard places, welfare may be better than the alternatives.

If you're 65 or older, or blind, or disabled, and really broke, you may qualify for Supplemental Security Income. This is a joint federal-state program that supplements the income of people who are right at the edge. The formula for qualifying varies from state to state and can't be summarized in a blog like this. Suffice it to say that only those with very little or no income and few assets qualify. Contact your local Social Security office for information. Some five million or so people are on this program, so it's a (quite modest) lifeline for many.


Maybe you think this is obvious. But a lot of people, especially those accustomed to a nice lifestyle, have trouble cutting back. This only accelerates the arrival of insolvency. Yes, cutting back means potential embarrassment with one's family, friends and neighbors. Perhaps above all, it means truly confronting your own feelings of failure and disappointment. Try to view the situation as a challenge. Our finest moments don't come when the sun is shining and the going is easy. They come when everything seems to go wrong. Cutting back is a rational and intelligent step toward survival and future prosperity. Tightening your belt is much better than spending like mad and ending up in bankruptcy. You might be surprised at now liberating a lower intensity lifestyle is.


The one insurance coverage you'll surely need sooner or later is health insurance. No one has perfect health, and a major health problem can blow up an uninsured person's finances in a flash. Many of those who are laid off have rights under a law called COBRA to keep employer-sponsored coverage for 18 months. COBRA is expensive because you have to pay the full premium; the employer no longer subsidizes you. The recent economic stimulus bill provides some assistance with COBRA costs. See

Those that can't use COBRA may be able to find coverage through a variety of other resources. See and None are cheap. Be wary of inexpensive health insurance policies, often peddled to individuals by insurance agents, because they often contain nasty holes in coverage. Health insurance is one thing where you tend to get what you pay for. That doesn't mean you shouldn't shop for the best policy for your needs. But make sure you understand what you are and are not getting.

If you have a moderate income or less and children who are 19 or younger, your children may qualify for subsidized coverage under the State Childrens Health Insurance Program (SCHIP). Check your state's website for details.

If your income is low enough, you and your family may qualify for Medicaid. This too is a state-administered program, so your state's website should have details. Some states combine the administration of SCHIP and Medicaid, but these remain separate programs with different eligibility requirements.

Of course, if you are 65 or older and have no other health insurance, enroll in Medicare.


No matter how bad things get--you lose your home, your savings, your whatever--it's important to keep the basic tools of the trade for people in the 21st Century. These are the things you need to keep going, stay connected, and find a new job.

Computer. Vast amounts of information needed for daily life (like new employment opportunities) are placed on the Internet. And who doesn't use e-mail? A computer is essential. The waiting times for the computers at public libraries can be hours. It's best to have your own computer. A laptop is preferred, since it can be easily carried (in case you have to change living arrangements) and Internet access is as close as the nearest WiFi source. If you have a Windows based machine, don't skimp on the anti-virus software.

Cell Phone. You understand why you need a telephone. A cell phone is better than a land line because it can be used anywhere you get reception, and doesn't need to be re-connected in case your living arrangements change. If your monthly plan is too expensive, switch to a pay as needed account and don't talk or text so much on the phone.

Credit Card. It's almost impossible to get by on cash alone. Debit cards tend not to have as much consumer protection as credit cards. So it's a good idea to have a credit card. Minimize the number of credit cards you hold (fewer cards will tend to have a positive impact on your credit rating). Try not to carry a balance over from month to month. If you're carrying a balance, try to pay it down because, recently, banks have gone wild raising rates on credit cards.

Car. Unless you live in New York City, you pretty much need a car. Maybe a few people with narrowly focused lifestyles in Boston, San Francisco and Washington, D.C. can get away without a car. Many of those find themselves signing up for car sharing services after shelling out too much money to hostile cabbies. The other 97% of Americans find it really difficult to get by without a personal vehicle. Downsize your wheels if you find the lease on the Escalade too expensive. Besides, real millionaires are more likely to drive a Camry, Accord, Taurus, or Impala, so chose a more modest vehicle and project the image of quiet prosperity.

Cash. When economic times are tough, cash is the emperor. Even if you've lost your job, try to keep some cash in a safe place because, as bad as things may be, there's always a chance they'll get worse.

Flexibility. Flexibility about what job you'll take, and what region you'll move to in order to get a new job, can make a substantial difference in your future. Bear in mind the cost of living. Quality housing in nice suburbs with good schools is available for a small fraction of the Northeastern U.S. or coastal California cost in cities between the Alleghenies and the Sierra Nevadas. A couple in Dallas making $150,000 a year and living a middle class lifestyle can retire as millionaires, while a couple in the suburbs of New York making $200,000 a year and having a similar lifestyle might just manage to get by. If you have an open mind, you'll probably find more possibilities and potentially position yourself for prosperity.


In the days when portable transistor radios were the hot, new high tech product, it was axiomatic that the mortgage be paid no matter what. That's not necessarily today's accepted wisdom. Many and perhaps most who bought homes since 2005 are underwater on their mortgages. Some are $200,000 or more underwater. There is a point where it may seem rational to walk away from the house. For most people, that won't be the first option. They may have the kids enrolled in the school district they want. Their spouses may still be working and not want the negative impact on their (the spouses') credit ratings--remember that joint debtors on a mortgage would both see their credit ratings adversely affected by a default. They may like the house and want to keep it for the long term, with the expectation that housing values will rebound eventually.

Unfortunately, meaningful assistance for distressed homeowners is about as easy to find as water in the Sahara. None of the federal programs have had much impact. And other initiatives--by state or local governments, nonprofit organizations, and so on--have only had limited success. For what they may be worth, here are a variety of resources for defaulting homeowners: and

But if the mortgage payment is the one thing that is breaking your budget every month, and you can't relief from your lender or anyone else, leaving the house behind may be sad but sensible. What you need to do is stay above water until you can get another job. Then think about buying another house. Even if you have a damaged credit rating, re-establishing a solid financial base is probably better for your long term welfare than grinding your finances down trying to pay the mortgage, and then winding up in bankruptcy. Lifelong renters who are scrupulous about saving and investing can build significant wealth. Don't sacrifice everything for the house.


The temptation to tap into your retirement accounts will grow stronger as your other cash resources diminish. Avoid tapping into the retirement accounts unless it's absolutely essential, because you'll pay the price of doing so when you're too old to work.

Remember that your retirement accounts are protected from creditors if you go into bankruptcy, and are largely otherwise protected from creditors. Thus, if you don't use them, you'll probably get to keep them. Tap into the retirement accounts only if you're pretty sure that doing so will tide you over until you can get a new job and revive your finances. But don't drain the retirement accounts if you're likely to be sliding into bankruptcy. Leave them alone, and keep them safe from your creditors. That way, you'll have some retirement savings already stashed away when you try for a fresh start.

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