Skip to main content

11 money moves to make after a job loss or pay cut

If you’ve been laid off from work—or anticipate furloughs down the road—it can be even more of a challenging time. Any sudden drop in income can cause a budget crunch, but by taking action you might be able to avoid long-term financial hardship. Following these 11 time-sensitive steps in the days—and weeks—after a job loss or salary cut can help you find your financial footing.

Act right away


Collect final payments

If you’ve been laid off, ask your employer about your last paycheck, and how you will receive it. Some states require employers to pay upon termination. Others let companies cut the check on the normal pay schedule. Depending on the state you live in, you may be allowed to collect payment for unused, accrued vacation time and sick days. In addition, check your employee handbook to see if you’re eligible for severance pay.


Apply for unemployment benefits

If you’re let go or furloughed, you may qualify for weekly unemployment insurance benefits. And if you received a pay cut or had your hours reduced, you may be eligible for partial unemployment benefits, too. The U.S. government’s passage of the CARES Act in 2020 has made it easier and faster to file for unemployment—you can apply in person, by telephone or online with your state’s unemployment insurance program as soon as you’re out of work. The process varies by state, but most states have an online calculator that can give you a general idea of how much money you’ll be able to collect each week and how long the benefits will last. After filing your claim, it could take several weeks before you receive your first check, so it’s a good idea to apply as soon as possible. Visit the Department of Labor website to find information specific to your state.


Prepare an emergency budget

If you haven’t already, create a new monthly budget. Start by breaking out the money you expect to have coming in during this time, which may include your partner’s income, unemployment or severance payments. Then, review your current expenses and prioritize them into two groups: the bills you must pay like rent, groceries and utilities, and the nonessential things, such as subscription services and gym memberships. A retooled budget can help you simplify your costs and reveal ways to save.


Make sure you have enough insurance

When you lose a job, you often lose the insurance—health, life and disability—offered by the company, too. It’s important to quickly replace your health care plan, so that should any medical emergencies arise, you’re financially covered. Check if your employer offers an extended health insurance option, such as through the Consolidated Omnibus Budget Reconciliation Act (COBRA). If it does, you’ll have to pay the monthly premiums. If not, there are options. Depending on your age, you can join your parent’s plan (if you’re 26 or younger). If you’re married, you can be added onto your spouse’s plan. Otherwise, consider shopping the federal government’s health insurance marketplace.

Do within 30 days


Go to who you owe

If you’re concerned about your ability to pay upcoming bills, talk to your creditors. Many banks and lenders have announced relief policies to help ease the burden during this time. First, you’ll need to explain your financial situation to them. Then, ask to suspend payments, interest and fees on loans and credit cards. Additionally, speak to your monthly service providers like the cable and telephone companies about lowering your rates.


Tap your emergency cash options

If you have an emergency fund, now is the time to use it. However, if your savings are drained and you’re concerned about your ability to cover day to day expenses, consider your borrowing options plus any associated risks. For example, if you qualify for a personal loan, rates tend to be lower than what you would pay in credit card interest. It may be tempting to raid your retirement accounts, but this is a choice that should be weighed carefully, as it could jeopardize your long-term plans.


Talk to your family

Losing your job is scary—and it can be for your children as well. Have a candid—and age-appropriate—conversation with them. In particular, talk with them about how the family will get through this time together. While some things could change, a carefully crafted conversation about the family’s short- and long-term spending priorities is a great way to get buy-in from everyone.


Scale back on saving for college

Saving for college is a point of pride for many parents, but this may be a time to lower how much you’re socking away. Reducing by half—or holding off entirely, if you’re really tight—the amount you’re saving for your child’s education will free up cash for other essential expenses. Consider options like letting friends and family know how to add to your child’s college fund with birthday or holiday gifts.

Complete within months


Shop for low-interest offers

With reduced or no income, it’s easy to put purchases on your credit cards. Avoid doing so, if you can, as high-interest credit card debt can quickly add up, putting your credit score at risk. If you must charge purchases, look for credit cards with the lowest interest rate. Offers that shave off even a few percentage points can end up saving you a lot of money in the long run.


Enter the gig economy

Finding full-time work can be a full-time job, and it could take months to find a new position. There are many steps you can take. It helps to assess your career goals and think about whether you want to change industries. If so, do you need to learn new skills? You’ll also want to update your resume and profile on professional social media platforms, do some market research and reach out to contacts in your network. Until you can land the job that’s right for you, consider part-time or gig work to help bridge the gap. There’s a variety of side jobs, from delivering food or picking up a retail shift to serving as a work-from-home customer support representative that can help supplement your income until you find a new role.


Pay it back—and pay it forward

Once you start earning money again, it’s a good rule of thumb to stick to the streamlined budget you used while unemployed while you work to rehab your finances. If you took on high-interest debt, prioritize paying that back as soon as possible. Paying down debt will also help rebuild your credit score if it took a hit while you were unemployed. Next, if you tapped into savings or retirement accounts, you’ll want to build that amount back up. Sometimes the best motivation for saving for the next rainy day is having been through one—setting up an emergency fund now will help you navigate any surprise costs in the future.

Close Disclaimer

The material provided on this website is for informational use only and is not intended for financial, tax or investment advice. Bank of America and/or its affiliates, and Khan Academy, assume no liability for any loss or damage resulting from one’s reliance on the material provided. Please also note that such material is not updated regularly and that some of the information may not therefore be current. Consult with your own financial professional and tax advisor when making decisions regarding your financial situation.

Up Next

Contact Us

Investing involves risk, including potential loss of principal.