If recent headlines have made you constantly refresh your inbox over the last few days, you are not alone. The growing wave of layoffs is generating panic among high-earner employees.

The technology industry has been announcing layoffs these last couple of weeks. Unemployment increased to 3.7%, causing people to doubt their employment security. The closer we get to the holiday season, the louder the headlines around tough decisions made by the big players in the industry. 

We have discussed inflation for the last 6 months, and no one can avoid conversations about the upcoming recession. Higher interest rates anticipate a decrease in growth this upcoming holiday season, forcing companies to make difficult decisions. 

Tech companies predicted continuous and rapid growth in the industry after the trends seen during the pandemic. However, the reality is that the current economic state has indicated the industry’s growth will slow down. As costs increase, production decreases and higher interest rates imply higher labor costs.

Where Do You Stand?

For high-earners who have experienced layoffs or are currently worried about being the next person impacted, we’ve put together essential action items to take when layoffs/unemployment anxiety keeps you up at night or if you’re now looking to find answers while unemployed. Despite the potential emotional impacts, there is a lot you can do to regain your footing in your financial situation.  

If You Fear You’ll Receive a Layoff Notice

If you’re worried about losing your job, one of your first steps should be evaluating your current financial situation. Take this extra time at home to reevaluate your budget, expenses, and savings plan. Double down on your emergency fund and trim unnecessary expenses like that you keep forgetting to cancel. Now is the time to avoid making emotional purchases.

If You Don’t Have a Budget

We understand that budgeting isn’t fun but if you don’t have a month-by-month budget, work on combing through your bank statements, paychecks, and credit card statements to build a realistic budget. Prioritize paying off high-interest debts, mortgages, and other debts when formulating your budget. Be honest with yourself about where you’ve been spending a little more than necessary and build personal awareness of discretionary spending.

If You Receive a Layoff Notice

If you’ve been laid off, remember that you’re not alone. While there’s often a stigma or sense of shame around being laid off, particularly when you’re a high-earner, keep the context of the current unemployment wave in mind and avoid blaming yourself. Give yourself a couple of days to relax and disconnect from your previous role, practice activities you enjoy and perhaps didn’t have a chance to do while employed. Then, focus on making your new full-time job to find an opportunity, and seeking meaning in where you’d like to be. Consider this an opportunity to improve your financial situation and set new or updated professional goals. 

Your next step upon receiving a layoff notice is to check in with your company’s HR team. Find out when you’ll receive your last paycheck and what it will include, particularly getting paid out for unused vacation time or other corporate perks. 

A clear picture of your new financial situation will allow you to plan for the months ahead: including if you’ll receive severance pay, unemployment benefits, potential stock options, and how your emergency fund might fit into the equation.

Severance Pay

Severance packages come in many shapes and sizes, some might include services like LinkedIn Premium, career transition services, or an extension of healthcare. Most often, they are a one-time lump sum paid out on the day you are laid off or your final day of employment. 

As a high earner, you’ll likely receive a large lump sum, and while that will provide some momentary relief, it’s easy for it to vanish without making a plan for those funds. Your severance can come in several forms, including an extension of healthcare benefits and/or career transition services, but they usually consist of a one-time lump sum paid to employees after their last day of employment. Receiving a lump-sum severance payment can feel like a windfall, but it can quickly disappear without a plan. Review your budget to see how the severance package can keep you above water for the coming months.  For example, if you don’t have enough to pay your debts, consider allocating these funds towards that. 

Additionally, remember that just like you potentially negotiated your high salary or compensation package, you can negotiate your severance package. Don’t be afraid to discuss the package with your employer and find a middle ground where you both feel comfortable ending on good terms. 

Filing For Unemployment Benefits 

File for unemployment as quickly as possible. The sooner you make your claim, the sooner you can receive benefits. As an unemployed high-earner, it can feel off-putting to request government aid; however, remember that this is why these monetary and fiscal policies have been put in place, and consider the positive impact they can make on your finances over the coming months. There are plenty of unemployment benefits for which high earners are eligible, and your unemployment benefits claims are completely confidential, meaning no future employer will know you’ve received funds. 

Unemployment benefits are temporary cash you can receive for a maximum of 26 weeks and can be directly deposited into your existing bank account. These funds are available to you if you’ve lost your job through no fault of your own and are actively looking for a new role. 

Each state has its virtual website for filing unemployment, so search “your state + unemployment claim” to find the right page for you. Upon filing your claim, your state’s respective Employment Department will verify your eligibility and wage information to determine your weekly benefit amount.

Stock Options

If stock options were included in your compensation package, as occurs for many technology high earners, discuss how long you have to exercise your stock options with your employer. Be sure to ask if there are any stock awards you will have to forfeit. As part of your severance package, discuss with your employer if you can extend the time to exercise these stock options.

401k or Other Retirement Plans

What happens to your 401k after leaving a company depends on your plan. Review with your financial advisor or accountant how your specific retirement plan will be impacted by your unemployment. You might be able to contribute the maximum amount to your retirement account before your last paycheck, a particularly good idea if your company offers a match. The maximum amount an individual can contribute in 2020 is $19,500 for people under 50 years old and $26,000 for those 50 and older. 

Emergency Fund 

Well done if you’ve been responsible stashing a percentage of your salary toward your emergency fund! After evaluating your potential unemployment “income” sources, consider dipping into your emergency fund. While it might feel scary to utilize funds you’ve been saving for so long, remember that this is an emergency. Use these funds to make ends meet as you work on finding other employment. Once you do, you can contribute back to your emergency fund. 

Unemployed High Earners: It Will Be Ok. 

The fear of being laid off can be emotionally challenging. As with all financial decisions, finding the right advice and developing a thoughtful long-term plan can make a big difference between scrambling financially and feeling secure amidst great uncertainty. You’re not alone during this difficult time.