Maybe you’ve just overheard a few layoff whispers at the water fountain. Or maybe you’ve already seen some of your coworkers sent packing—and it’s clear that more bloodletting is in the cards. For whatever reason, you’re worried that your job is in jeopardy and that you’ll be laid off soon.
You’re hardly alone. According to a 2025 Clarify Capital survey, 1 in 3 respondents have “layoff anxiety.”
Fear of losing one’s job is stressful, but it’s important to focus on actions that are still under your control. You can’t stop a company from laying people off, for instance … but you can certainly make financial preparations if your gut says layoffs are on the horizon.
Read on as I explain how to be financially proactive, instead of reactive, in the face of potential layoffs. I’ll discuss a few actions you can take now that will soften the blow should your company decide to let you go.
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Steps to Take If You Think You’re Going to Be Laid Off
While having an excellent work ethic and being good at your job can certainly reduce the chances you’ll ever be laid off, even five-star employees can get the ax. It’s just a sad truth of life.
However, while you can’t necessarily prevent being laid off, you do have the power to limit how much it negatively affects your finances. Take the following actions to put yourself in a better financial situation if you think you could get caught up in a round of corporate layoffs.
1. Adjust Your Budget Now
When you lose your job, one thing that becomes evident immediately is that your budget needs to change, even if only temporarily.
But you don’t need to wait until you’re laid off to adjust your budget—you should consider being proactive.
Evaluate your current spending and compare it to what your estimated monthly cash flow would look like. Obviously, single-income households would have to make more drastic adjustments than dual-income households. Someone expecting severance pay would need to make fewer adjustments than someone without it. If you would apply for unemployment benefits, that should be factored into the revised budget, too.
Once you’ve evaluated your budget, begin making at least some changes as if you were already laid off.
You don’t necessarily need to strip your spending down to the bare minimum right away, but you might want to cut back some discretionary spending. For instance, if you overpay any bills, such as your mortgage or auto loan, start paying just the monthly minimum. Pause making any vacation plans or major recreational purchases. Consider pausing contributions to retirement accounts.
Not only does pulling back on your budget slowly get you used to what might become a temporary reality for you—it also helps preserve much-needed cash that you’ll certainly need if you do in fact lose your job.
Related: Should You Tap Into Retirement Savings After a Layoff?
2. Start (Or Pad) Your Emergency Fund
Everyone should have a “fully funded” emergency fund, regardless of their perceived level of job security.
The generally recommended size for an emergency fund is enough money to cover three to six months’ worth of essential expenses. If you don’t have an emergency fund or do but haven’t reached that account size, you should prioritize saving immediately. But even if you do have an appropriately sized emergency fund, you might want to consider stashing away even more just in case—if for no other reason than you never know how long a spat of joblessness might last.
By the way: If you don’t have a designated emergency fund, but you do keep excess money in your checking account, consider moving whatever money you don’t need for month-to-month expenses into a liquid, interest bearing account such as a high-yield savings account or money market account. Not only will those kinds of accounts help you grow your money—they’ll also put a “wall” between your spending money and saving money, making it less likely you’ll dip into those funds for non-emergency purposes.
Related: Frugal vs. Cheap: What’s the Difference?
3. Try to Lower Your Credit Cards’ APR
You should always try to pay your credit card off in full each month to avoid accumulating a large bill. Paying the minimum each month will help you skip late fees and penalty interest, sure, but your remaining balance will keep accumulating interest, creating a snowball effect in which each subsequent month’s bill becomes more and more painful.
How much interest? The average annual percentage rate (APR) in the U.S. right now sits around 28.70%. That would translate to an additional $23.92 in interest payments every month on a mere $1,000 credit card balance.
If a layoff feels imminent, you might want to do one (or both) of two things:
- Get a 0% balance transfer credit card. These cards don’t charge interest on balance transfers, purchases, or both, for a predetermined amount of time. You would still need to make your minimum monthly payments to keep the 0% offer valid, but it would provide some flexibility until you have enough free funds to pay the balance in full. If you’re unable to find work quickly enough to fully repay the transfer, interest will begin accruing on the remaining balance. Still, given that until then, your money would be going toward paying off principal, and not interest, you’d still be coming out ahead.
- Ask for a lower APR on your current card. Believe it or not, if you call your credit card company and ask for a lower APR, sometimes, they’ll oblige! Not every card issuer will say yes, but if you have a long history of timely payments, they might. But hey, asking is free, and the worst thing they can do is say “no,” so it’s worth a few minutes to try.
Note that both of these actions could result in a hard credit pull, which could temporarily ding your credit score.
Related: Tax Implications of Getting Laid Off
4. Reduce Your Tax Withholdings at Work
In preparing for a potential job loss, you also could adjust how much tax is withheld from your paychecks. This is a slightly more complicated planning tactic, and how much you adjust is subject to a number of factors:
- Time of year: All things equal, if you’re laid off earlier in the year, the withholding rate for your current pay likely will account for the higher income you anticipated earning absent being laid off. If you believe a layoff is imminent early in the current year (and if you think finding a replacement job at a comparable pay rate will be challenging), you could file a new Form W-4 to request a lower amount of tax withholding commensurate with your expected lower taxable income.
- Where your income falls in the income tax brackets: No matter where your income falls in the tax brackets, less income will almost surely result in having to pay less taxes overall. However, if your income is near the endpoint of a tax bracket, it’s possible that less of your income will be subject to a higher income tax rate.
- Your estimated likelihood of being laid off: If your employer has communicated in no uncertain terms that layoffs are happening and it’s not so much a matter of “if,” but “when,” you might factor this into your decision about changing your withholding rate.
- If you’ll be paid a severance: Don’t forget to account for any severance or final payouts made by your employer when calculating what your total taxable income will be for the year. For example, if you’re laid off on Sept. 30 but your work plans to pay you 12 weeks of severance, carrying you to the end of the year, you’ll effectively be paid as if you had worked the entire year, and thus you might not need to adjust your withholding.
Making withholding adjustments based on the probability of getting laid off isn’t something to be taken lightly. Several variables affect the benefit of making adjustments and can result in accidental underwithholding if handled improperly. Be mindful of the risks and rewards here, and only act if you’re very or completely sure that layoffs are imminent.
Related: How to File a Tax Extension [Postpone Your Taxes]
5. Start a Side Hustle
With few exceptions, losing your job means losing either your household’s largest income stream, or at least a major source of income.
To soften the financial blow, you might want to consider starting a side hustle. A part-time gig is unlikely to fully replace the income you’d lose by being let go, but it can provide at least some cash flow, reducing the amount you need to pull from your emergency fund. (And until you’re let go, you can use your side-hustle earnings to build up that emergency fund.)
Your side hustle doesn’t have to be very time consuming. You might start a gig economy job, such as driving for Uber a few hours on weekends. Or you might sell unwanted items on eBay. In some cases, you might even be able to find freelance work similar to what you do at your main gig—provided that you don’t have a noncompete clause in your contract or would otherwise be prohibited from doing so.
Related work could even help your resume, showing continued employment in your space even after you lose your full-time job.
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6. Use Up Benefits That Don’t Get Paid Out
If you’re extremely confident that a layoff is just around the corner, you might want to begin cashing in on certain benefits that would disappear if you were let go. A few examples?
Insurance: Let’s say you have dental insurance through your employer. While you might get a grace period of coverage after your layoff, it might not be enough time to schedule and get required work done. Since you won’t know how long it will take you to get a new job (nor whether that employer will even offer dental), you might want to go through with procedures like cavity fillings and dental crowns before you lose that coverage.
Flexible spending account (FSA): Do you have a flexible spending account? Unless you are eligible for and decide to get COBRA continuation coverage, any unused funds in your FSA go to your employer after your employment ends. And even if you do choose COBRA, your FSA funds can’t be used to cover your monthly COBRA premiums. Thus, as a general rule, the best course of action is to use all of your FSA money before you get laid off or voluntarily leave a job. If you don’t have an immediate need, consider using some of the money to stock up on over-the-counter medications and personal health items. You can check the FSA Store to see what is eligible.
Interestingly, you might even be able to spend more money from your FSA than you contributed to it. An FSA can pay for eligible medical costs up to the amount you agreed to contribute for the full year, even if you haven’t contributed the entire amount yet.
Paid time off (PTO): Lastly, look at how much paid time off you’ve accumulated. Many states require unused PTO to be paid out when you separate from your job; if that’s true for your state, the extra money could come in handy. However, other states allow your employer to have your unused PTO forfeited if you lose your job. If you have a lot of PTO that you would simply lose, don’t be shy about using some or all of it up. That time could go toward your aforementioned medical procedures, as well as for applying to/interviewing for other jobs.
Related: 50+ Best Money-Making Apps That Pay You Real Money
7. Consider Asking for a Forbearance
Another step you probably don’t want to take until you absolutely need to is to look at forbearance options.
A forbearance is a pause or temporary reduction in loan payments. It doesn’t eliminate or decrease what you owe, but it can provide much-needed breathing room when money is tight.
Forbearances are more common with certain types of debt—among them, mortgages and student loans.
You’ll want to call your mortgage servicer to ask about forbearance and other hardship options. Your servicer might require a forbearance request to be made within a certain amount of time following the loss of a job, so it’s important not to miss that window.
Not all mortgage forbearances work the same. For example, some servicers might pause your payments, then require you to repay any missed payments at the end of your mortgage. Others may require repayment at the end of the forbearance. And still others might not provide a full pause in payments, but instead temporarily reduce your monthly bill.
Student loan forbearance is also a temporary pause or reduction of your monthly payments, and it differs based on whether you have federal or private student loans. For federal student loans, the servicer can offer forbearance for up to 12 months at a time. For private loans, what they can offer is more varied and generally more limited. Keep in mind that interest still accrues throughout forbearance.
Related: 60 Personal Finance Statistics You Might Not Know (But Should!)
