The dreaded “Quick Sync” email hits your inbox and before you know it you are sinking like a meme stock. It may happen indeed. Everyone working in tech, finance, media, or any other industry which uses humans has talked about it during happy hours. The difference between knowing that the layoff may happen and being prepared financially for this eventuality is enormous.
There is something everyone in the upwardly mobile generation does not want to hear – most of mid-level executives are financially vulnerable without even realizing it. You have a good salary. Yes, you probably max out your 401(k) contributions. The sad reality is that a lot of people making from $120K to $200K per year will end up having serious problems financially after 60 days without a paycheck. It is not a sign of weakness. It is just the blind spot of our culture.
So let us fix it. Here is what you should do not with a generic statement of living “below your means” but with concrete actions.
Build Your War Chest Before You Need It
Emergency funds talk is boring. Everyone knows that they have to create one. Very few people actually have enough money on them especially considering how high the burn rate is when you are an executive. Three months of expenses are the bare minimum, but it is not enough in case of a layoff. The hiring cycles have never been so long. It takes even longer time to hire executives due to increased scrutiny on the part of employers.
So your goal is to accumulate six months of liquid cash stored in a high-yield savings account of Marcus, Ally or Amex. These funds should not be invested in the stock market or crypto assets. This is what you are going to live on for some time.
Do not estimate your monthly burn rate. Discover the real one by analyzing three months of your bank statements from Chase or Wells Fargo and adding everything you spent during this time.
Cut the Fat Now, Not After the Pink Slip
It is going to feel desperate and reactive once you are laying off and cutting your expenses. However, it feels proactive and strategic when you do it beforehand. The difference is huge psychologically and should not be overlooked.
Go through all of your expenses mercilessly and cancel whatever you do not need to survive and maintain your health. Peloton membership that you use two times per month, the premium LinkedIn subscription, and deliveries of meal kits to your door from HelloFresh. If these expenses are not related to your survival, health, or income generation – cut them.
Downgrade wherever you can tolerate it. Downgrade from the premium Spotify plan to the basic one and change your Netflix subscription to the ad-supported version. They are small steps, but they will add up into big breathing space when your income becomes zero.
The idea is to reduce your monthly burn rate before you really need it.
Learn About Your Severance Package
Most of the people read their employee handbook for the first time when they are packing a cardboard box for the Uber van. It is a mistake.
Learn your severance package now. Some companies offer one week of severance for each year of service. Some offer two weeks. Some companies are generous and offer more than that. Learn about it.
In case if you are in the middle of the vesting period of your RSUs or stock options, find out your situation. The companies like Google, Amazon and Meta have some rules regarding unvested equity in case of termination. Some of them accelerate the vesting period, some do not. This may mean tens of thousands of dollars one way or another and it is something you need to know now.
Also check if you will have the health insurance coverage after the termination date. You will have to buy COBRA coverage but it is expensive. Budget $600 to $800 for an individual coverage and more if you have dependent(s).
Diversify Your Income Before You Lose It
Using one employer as your only source of 100% income is a financial equivalent of investing all your money into one company’s stocks. It makes no sense. It makes even less sense in terms of your earning potential.
So start diversifying your income by building the side income stream now. As a mid-level executive you have specialized knowledge which makes you interesting for other companies for consultation on a project basis. Start by creating an LLC through LegalZoom or the system of your state. Create a portfolio website with Squarespace. Let your professional network know that you are ready to work on a fractional or consulting basis.
There are platforms like Toptal and Catalant targeting experienced professionals. The rates are not high compared to your salary. But they are not zero dollars that you will earn when you will be out of work and will not do anything.
It is not about burning yourself out on the freelance projects. It is about building the bridge income that allows you to sustain until you find the right full-time job.
Network Like Your Career Depends On It
Because it does.
The best time to build your professional network is before you actually need it. Humans can smell desperation and it makes them uncomfortable, not helpful during your job search process.
Contact the former colleagues, your mentors and other professionals in your field now. Do it not in a transactional manner “Hi, do you know someone hiring?”. Do catch-ups, coffee talks and comment on their LinkedIn posts. Attend industry events once or twice per quarter. Join relevant Slack and Discord communities.
The point is – when the layoffs will eventually happen and they statistically will, at some point in your career, you need to have the warm network ready instead of reaching out to cold contacts during the crisis.
Get Your Documents Ready
Update your resume now when you have an easy access to your achievements and performance metrics. After you lost the access to your company’s system it will become surprisingly difficult to remember exactly what revenue you created in a certain project.
Make sure that you have copies of your work samples, presentations or portfolio pieces that you are legally allowed to take home. Also check your employment agreement for the non-compete and non-solicitation clauses. Some of them are enforceable and some of them are basically threats. You should know the difference.
Put aside your most recent performance reviews. They may be used as a leverage during severance negotiations and prove that your termination was retaliatory or discriminating.
Protect Your Mental Health Budget
It is often overlooked, and it should not.
Layoffs are traumatic experience. You are going to lose your identity, routine, social connections, and security. Therapy during a career transition is not an option, it is an essential thing.
Use the EAP program offered by your current employer now to build the relationship with a therapist before you lose this benefit. There are therapists offering sliding scale rates for people between jobs. There are apps like BetterHelp