How to Prepare Financially for a Layoff Before It Happens

The best time to prepare for a layoff is before it ever happens. In this episode, Ryan walks through a step-by-step plan to get financially ready, starting with your survival number, the bare-minimum amount your household needs to cover each month.

From there he covers building an emergency fund that fits that number, trimming fixed costs ahead of time, and knowing your options for health coverage like COBRA and what to do with a 401(k) when you leave a job. The point is to replace fear with a plan, so a job loss becomes a setback you are ready for instead of a crisis. This is education, not personal advice, so tailor the steps to your own situation.

Find "Your Fiscal Physical" the book on Amazon

If you have suggestions or feedback, please email us at: Podcast@AlchemyWealth.com

And, as always, Stay the Course!

Transcript

Welcome And Guest Introduction

SPEAKER_00 0:01

Welcome to the physical physical podcast. Join us to week is we said down with the founder of Alchemy Wealth Management and author of your physical physical, Ryan Nelson. Tune in to gain valuable insights and practical tips as we simplify complex financial concepts into digestible lessons. From budgeting to retirement planning, this podcast is your go-to resource for mastering financial literacy.

Aaron Hoisington 0:33

Welcome everybody to this week's episode of the Fiscal Physical Podcast. I am here this week with the a published author, uh Mr. Ryan Nelson, a uh a guy you can find his book on Amazon, The Fiscal Fiscal Physical, Seven Keys to Becoming Financially Fit. Highly recommend that being read. He is also the founder of the uh successful alchemy wealth management here in Reno, Nevada. And uh uh Ryan, with that uh introduction, I'm gonna ask you uh uh how are things, my man? How are how's the life going?

Ryan Nelson 1:02

Things are good. Things are good on my end. How are things on your end?

Aaron Hoisington 1:05

Not too bad. Cannot complain, cannot complain at all on my end here. So um we're here to uh bring you guys another uh uh episode here on the Fiscal Physical Podcast. I've uh you know, we're into the into the hundreds somewhere, so uh if you've stuck with us the whole time, thank you so much. If you're joining us for the first time, welcome. I'm excited to uh uh you know help uh you know guide you uh guys on your uh fiscal physical journey here. So uh Ryan, let's uh let's dive in. You ready? Let's do it.

Why Layoff Prep Matters

Aaron Hoisington 1:34

All right. So this episode is going to revolve around how to be financially prepared if a layoff happens, or be prepared before a layoff happens. And uh, you know, it's one of those things I uh I think we've mentioned on this podcast before that I gotta stop watching the news. Uh but I do find it entertaining and I kind of feel like I'm up to date on certain things. But uh, you know, a lot of the things you see these days or have seen is Company X is laying off X number of employees. Like, and it saddens me to hear, like, you know, you know, somebody's losing their job involuntarily. It's an incredibly stressful time. Don't wish it upon anybody else, but it's great to be prepared. Um today we're gonna talk about how a person can financially prepare for a layoff. It's like one of those subjects. I remember one of our early podcast episodes where we talked about the you know, lifeboats on like a on a big ship or something like that. Hopefully you never have to use those lifeboats, but um might not be a bad idea to understand how they work and uh what kind of goes into it. So um, I'm hoping today we can kind of give that give that advice of how to financially prepare for hopefully something that doesn't come, but it's uh it's good to be uh you know in the know if it does. So uh you think that's uh something you can uh uh do for us here, Ryan?

Ryan Nelson 2:46

Yeah, absolutely. Let's do it. All right. Um yeah, like you said, I mean, layoffs can be extremely stressful. Um, but if you're prepared, I suppose it'd be a little less stressful, right? Um and uh so yeah, so uh there's god, there's a famous quote, and I just like on the tip of my tongue and I can't remember it, but there's a quote about like the best time to prepare for something is before you need it. Or like, do you know what I'm talking about?

Aaron Hoisington 3:07

Uh no. It's not the one about the best time to plant a tree, is it?

Ryan Nelson 3:12

No, no, no.

Aaron Hoisington 3:13

Because we've we've dropped that one a few times. That is a good quote too.

Ryan Nelson 3:16

Yeah, yeah, but it's anyways. I mean, the it's like, yeah, there's some famous quote out there, somebody will know it, but yeah, the best time to prepare is before you like, you know, the like if you're gonna prepare for an emergency, the best time to do that is before the emergency. You know, if you're gonna prepare for uh a layoff, you want to be doing that when there's no site of a layoff insurance. You know, so um again, that's what can make these things a little tricky is usually we just go through our everyday life and we're not getting laid off. And so we're not usually preparing to be laid off. And oftentimes we're blindsided by these things. Um, but so um I'd say the time to prepare would be now. So we could use that tree quote now. The best time to plant a tree is let's plant some trees. Best time to plant a tree is 20 years ago, second best time is today, right? So uh if we're not currently prepared, let's prepare it now. Um, you can kind of think of it as like a financial fire drill. So you want to go through a few steps, make sure you're sort of um ready in case something does happen. So, first, let's just run

Find Your Monthly Survival Number

Ryan Nelson 4:12

through this. First step, we'll say know your monthly quote unquote survival number. So um, you know, what do you what what how much money do you need per month to maintain maybe not your current lifestyle, but like your necessities, right? So, how much do you need for your house? How much do you need for food, right? Maybe not including in this month how much do I usually spend to go to the movies, right? So this would be like your base time, what we're calling your quote unquote survival number. So how much money do you need to not maintain your current lifestyle, but to maintain a lifestyle? Right. This makes sense there. So it'd be separating out kind of your needs versus your wants. Um, and then once you can identify that first step of how much do I really need, um, then what you can do is go to step two and start building your emergency

Build A Real Emergency Fund

Ryan Nelson 4:58

fund. So making sure we've talked about emergency funds in plenty of these past episodes, um, but making sure you have something to between the general consensus, three to six months of those needs. So if you run through your expenses and you say, man, I need $5,000, not for my current lifestyle, but for to cover all of my bills I've committed myself to already, right? Um, I need $5,000 a month, you're gonna want somewhere in there between $15 and $30,000 in your emergency um fund. Now, if you were to get laid off, if we were to translate this math, that tells us that you could survive on this for three to six months. So now, yeah, it's still stressful to get laid off, but knowing that you have a three to six month kind of runway to go find another job, that starts to make things a whole heck of a lot less stressful. You're not worried about making your mortgage payment next month, you're not worried about making your car payment, you're not worried about losing your car, you're not worried about how are you gonna afford groceries. This emergency savings does a lot of heavy lifting in this whole uh equation, and it it in itself can reduce a tremendous amount of stress. Yep. Make sense there?

Aaron Hoisington 6:02

Yeah, absolutely. Yeah, think about the just having that emergency fund, just the peace of mind too. I it it's like you mentioned, this is a very stressful time. Like I I don't have much hair on the top of my head, but I might lose the rest that I have if I if if I'm super stressed like that too. So I I tend to I I'm able to well, some people, but some people think more clearly when they're stressed. I don't know, there's some science behind that, but for me, I'm like, if I'm calm and can approach something where I'm like, cool, I don't have to worry about this specifically, like I need a job tomorrow, it can also kind of help in that job search for the next one, too. Like you can be more selective and such too. And that emergency fund really does kind of take a little bit of that weight off your shoulders, if you will.

Ryan Nelson 6:41

Great point. Um, in that emergency fund, just as a quick aside, again, I know we've talked about it in past episodes, but that should be boring, liquid savings, like in your money market or cash in your bank, you're checking your savings account. You know, this isn't $30,000 we have set aside in investments. Um, this is $30,000 of just norm boring money in an invest, you know, in your savings account that who cares what the interest rate is. The purpose of this $15,000 to $30,000 is not to get it, not to go get you a ton of returns. It's to sit there in that in that account and be ready for if something happens, like you get laid off, right? Um, so just be aware of that. Its purpose has nothing to do with market returns. Don't really honestly stress about what the interest rate you're getting on that is. Um, its purpose is to be liquid and available. Your investments have a completely different purpose. Right. You want to make sure those are optimized from a return standpoint, all that fun stuff. Um, but cool. So then step number three, if you did get laid off, it would be to reduce um your fixed

Cut Fixed Costs And Avoid Debt

Ryan Nelson 7:40

well, sorry. So this would still be in preparation. So as you're going through, you know, as you're going through your expenses today, and sort of in step one, we talked about like identify what your survival number is, right? Step number three would be what kind of things could we do to reduce that survival survival number? So um, do we have a a subscription to Netflix that we only use once a month and it's actually kind of in hindsight a waste of money and we could cancel? Um do, you know, if I'm looking to buy a new car, do I well I'm gonna combine these next two things. The the next thing would be be aware of new debts. So um the, you know, if I'm gonna go buy a new car, uh am I committing myself to a thousand dollar a month car payment? If so, that makes my survival number higher, makes everything a little trickier. Now it makes getting laid off a lot scarier. If I'm instead of buying the, you know, we talked in one of the previous episodes about like buying the the BMW can be like an ego purchase. Um, if instead of maybe buying that that car we can't truly afford but want, we go buy the less sexy car that's used and we can buy in cash. Well, guess what? Now we don't have a monthly payment that keeps our survival number lower. We get laid off, whole heck of a lot less stress, knowing, hey, I just own my car outright, as opposed to gosh, how am I gonna continue to make $1,000 car payments, right? Um, so it would take a look at your fixed expenses, um, evaluate them, see if there's any you can kind of reduce or cancel if it's a subscription, right? See how you can sort of clean up your fixed expenses and then be careful with that new debt. So be wary of you know moving into the new house that's gonna double your mortgage or buying the new car that's gonna create a new large car payment or um you know at doing the new addition to the house that's gonna create a HELOC or something like that. Yep. Makes sense. Um, and then the another step would be understand your benefits.

Insurance And Benefits Game Plan

Ryan Nelson 9:39

So understand your benefits before you get laid off, right? So health insurance is typically a big one. Usually you'll have your health insurance through your employer. Um, if you get laid off through your employer, what's kind of what you're gonna have an op uh option for? So oftentimes you'll have Cobra maybe available to you, or maybe you can get on your spouse's plan. So this would be one of those things where if you're evaluating this, if you're doing this evaluation before you get laid off, now you get laid off, you can just say, okay, I'm just gonna get on my spouse's plan, right? Like again, you're doing this analysis sort of at a time where you're not stressed, so that when you do get laid off, you say, Okay, I have my emergency savings. I know I can cover my expenses for the next three months. I already have a plan. I'm gonna get on my spouse's um insurance. Like you can start to imagine, like now you're just executing the plan. Right. Actually, you as we talk about it, it doesn't sound that stressful. Okay, I have three months to go find a new job. I know what I'm doing with my insurance. I was cautious of committing to any new ex like debt payments. Like you can start to see, like, oh yeah, this maybe isn't as stressful. Yeah, right. You already have kind of a plan built out. So just understanding your benefits, knowing what you'll do with them, reviewing like life insurance and disability insurance if they're tied to your employer. Um, a lot of times, like life insurance is what we call non-portable. So if you're end your employment with your employer, oftentimes the life insurance coverage will end. Sometimes that coverage is portable. So you just want to check this stuff out kind of again before you need it. Another one, sort of in line with benefits, would be know your 401k

401k Choices After A Layoff

Ryan Nelson 11:04

options. So usually you're gonna have four options with your with your 401k. You can cash it out, pay penalties, and fees. That's probably gonna be something we want to avoid, right? Uh we can oftentimes leave it where it's at, move it to a new employer plan once we do find land with a new employer, or move it to an IRA. So just check your options with your current 401k. You can have a plan of attack already. Know, hey, when I leave this employer, whether it's on my own terms or their terms, I already know what I'm doing with my 401k. It's just one more of those things where you get laid off, one less stress point. I know what I'm doing with my retirement funds, I know what I'm doing for insurance, I have my insurance, my emergency savings built up. I have three months to find a job. You can start to see again how like you can reduce so much of the stress. Absolutely, yeah.

Severance And Unemployment As A Bridge

Ryan Nelson 11:44

Um, and then one other thing I'd say is I see uh severance. So oftentimes you might get a small severance package or large, some people get large severance packages. Um, sometimes I see somebody will receive a severance package and treat it like a vacation. And then what they do is they just kick the stress can down the road. So they say maybe, maybe they get paid out like, I don't know, let's just say two months of severance. So then they say, Well, kind of like I deserve this. This is terrible. I'm gonna treat myself, and maybe they go just kind of hang out for six weeks um with really low stress, right? And then all of a sudden they start it kind of they eat up six of those eight weeks, and then all of a sudden it's like, wow, I gotta find a new job. I really kind of haven't done some of these other steps. Like now the panic kind of kicks in, right? Um, so I I would say, you know, obviously that's probably not ideal. Um if if you really do treat bri like your severance as more like a bridge than a bonus, um, it can help it can help that transition into the new job. Um, so I would just say, yeah, kind of think of it as maybe potentially extending that runway. Um, but really if you've taken all these steps on the front end, um, you could almost think of it just as like replenishing your emergency savings and in almost a supplemental emergency savings. Um you know, if if appropriate and eligible, you can explore unemployment benefits. There's no shame in using a system that's designed for this exact reason, right? You probably paid into it as well, exactly. Like it's yeah, so um, so yeah, yeah. I mean, you know, if if if you are eligible and it's appropriate for your situation, I'd say explore unemployment benefits, and yeah, it can help bridge that gap as well. Um, and then kind of move into like the last thing would be like then as this actually happens, like move into like a defense

The Hot Dog Sandwich Debate

Ryan Nelson 13:35

mode. So now you're kind of practic putting into practice the plan that we've created. So you're you now know what expenses are necessary, what dis expenses are discretionary, you know what you want to do with your health insurance, you know what you want to do with your 401k, etc. So now if something were to happen to you, you can sort of implement this plan, so to speak. You can pause unnecessary spending. Maybe you're not going out to sushi, you're eating it from you, you know, you're getting your food from the grocery store for a month, um, you're canceling the Netflix subscription, you know, you're you're taking those small actions, you're not going to the movie theater, uh, you know, you're not getting your coffees out at Starbucks. Um so you just put a few few small tweaks in plan into your into place and to get to that quote unquote survival number that we talked about in the beginning, you know your emergency savings in place, you just start executing, um, you just kind of start executing the the plan that we've laid out. Um so yeah, I'd say overall, I mean, I think that's that just following those steps will reduce just a tremendous amount of of stress. Um talking about this with your partner ahead of time is probably valuable, making sure you're on the same page. Like maybe you say, Yeah, we could cut out Netflix and your partner says, heck no, we can't. Or, you know, you say, you know, we could stop going to Starbucks and your partner says no, you know, or your partner says, hey, we could cut out the gym, and you're like, no, I that's a necessity, right? Like so having some agreement on sort of what your your sort of necessary expenses are versus your discretionary and stuff on the front end would be useful and reduce uh stress on the back end as well. But um, yeah, I think in all like when it's all said and done, um, the most important thing is probably having that emergency savings, but taking all these steps into uh account and you could build this plan in like an hour. Right, yeah. It's not like we're asking you to do a tremendous amount of stuff, but you know, if you were to take almost like a couple hours once a year, um, just kind of review your plan, make sure, okay, if anything were to happen to me, what do I got going on? Okay, perfect, perfect. Um, then if something were to happen now, again, it feels like you're just executing a plan as opposed to exploring a new world.

Aaron Hoisington 15:39

Nope, definitely. I think that that's uh like we come back to like the the lifeboat aspect of it. It's like, hey, hope you never use it, and hope you never need it, but you know, I you should probably pay attention like during the the mustard drill, I think is what they call it. Like about like, hey, like where are those like lifeboats located at? How do we use them? Okay, awesome. If that does come to into fruition, like let's make sure we we're we're and like to mention, like I I'm so much better just in general. And I think most people are about like, okay, cool, like this is the this is the situation, perfect. Let me look at the manual and what we're doing for this because we've already planned for this this exact or a similar situation to the to this and and being prepared, I think, is never a never a bad thing in these certain cases. So agreed. Um awesome, Ryan. Well, that was great, man. I appreciate it. And once again, everybody's situation's different, you know, your age, your your your financial situation, all these different areas. So um definitely hopefully we challenge the listeners to take a take a peek at their their specific situations, see where you sit, um, and then kind of kind of go from there on turn and in terms of how to best prepare for these situations and hopefully never come. We'll see. But awesome. Well, uh, we'll go ahead and uh take a pause here, Ryan, and uh we'll be back on the uh other side of this with some uh personal stuff. Everybody hang tight.

SPEAKER_00 16:51

And now to put the personal in personal finance.

Aaron Hoisington 16:57

All right, everybody. Thanks for hanging tight with us through that awesome transition you guys just listened to. Um hope everybody's uh having a great day still. Still here with Mr. Ryan Nelson on the personal side of the physical physical podcast. And uh, Ryan, I have one of the I I I've been told it's one of the most polarizing questions ever asked. I don't know if we've ever talked about it before, but um we'll go ahead and dive in here. Um listeners, uh, hopefully you're on the edge of your seats there. Um is a hot dog a sandwich? Oh yeah.

Ryan Nelson 17:33

Uh give you a minute to marinate on the gut reaction is no, but I can understand I can understand the argument for me for a meat between uh a piece of bread.

Aaron Hoisington 17:43

Yeah.

Ryan Nelson 17:44

Um but I don't consider a hamburger a sandwich either.

Aaron Hoisington 17:46

Really?

Ryan Nelson 17:47

No, you do?

Aaron Hoisington 17:48

I feel like I consider a hamburger a sandwich more than I consider a hot dog a sandwich, if that gonna make sense. Sure.

Ryan Nelson 17:54

Yeah, but if if there was a sandwich spectrum, I would put sandwich on one end and hot dog on the other and hamburger in the middle. Yeah.

Aaron Hoisington 18:02

What would you what would you consider like a sandwich then? Like what's your s what's a sandwich to you? It's gotta have two slices of bread. Two slices of bread. Okay, the bread is like the the factor on it. Okay. Definitely. Interesting. So what if I just slice the bun in half? It still doesn't count. It's still not bread. It's a bun. It's a bun. You're right. You're very true. Yeah, yeah.

Ryan Nelson 18:20

Yeah, yeah, I I I definitely get the sandwich argument, but yeah, for me it's not a sandwich. If for you it is a sandwich.

Aaron Hoisington 18:26

I I I think so. I think it's like an open face sandwich, is like kind of how I would, I guess. But I wouldn't call an open face sandwich a sandwich. Probably not. Like I feel like this is one of those those questions that like everybody's like, well, maybe you've never thought about, hopefully not. Like, but uh you you're like, what exactly is this? And you kind of start diving into like all these different things that we like consider one thing but don't consider another thing. So it's all it's kind of like an impossible question, if you will. But uh, but the the the hamburger one, I'm like, oh, I would have thought more of like I guess, but I guess you could make a like the other night, like we made hamburgers, but I didn't have any buns, so I just used like pieces of bread. And then I was like, is this a sandwich now? That sounds like a sandwich. That sounds like a sandwich to me.

Ryan Nelson 19:10

But but it I've done that too. If you don't have buns and you make it, you know, you use two pieces of bread, and I feel like while you're eating that, you're like, this just isn't the same. Yeah, it's like this is not the same. And it's like, yeah, that's yeah, that's the point. The bread is different than a bun. That's so true. Same or if you've ever used bread for like in placement of a hot dog bun, it's the same thing. You're like, this is just not the same. Right.

Aaron Hoisington 19:31

And you roll it up and you're like, okay. That's a good point. That is you've you've turned me around on this here. Yeah. Yeah.

Ryan Nelson 19:37

I I I I feel like, yeah, it's one of those things where like my gut tells me, yeah, it's not a sandwich. But if you I I I don't know what the technical definition of a sandwich, but I can certainly understand how if you like were looking at the technical definition of a sandwich, how you could probably start to convince yourself that it is a sandwich. Sure, sure.

Aaron Hoisington 19:50

Yeah, no, that that that was that that's awesome. So uh hopefully you the listeners kind of check that out and let us know like what uh uh what you guys think. I'm sure there's there's many very well, I know there's many varying opinions out there about uh um what actually constitutes a sandwich and if a hot dog falls into that. So um, but uh let us know. Let us know how you uh how you land on the subject, if you will. So I'm very curious.

Ryan Nelson 20:13

This is what uh Google uh this must be Gemini. Gemini says a sandwich is defined as two or more slices of bread. Oh, or more. Oh, interesting. Or a split roll having a filling, such as a meat, cheese, or salad between them. It's portable, often horizontal food items, sometimes encompassing varied definitions that include hot dogs or burritos in specific legal and regional contexts.

Aaron Hoisington 20:40

Legal context. That'd be hilarious. I wonder if some places like, hey, we're a sandwich shop. Like no, you guys just serve hot dogs. Yeah, yeah.

Ryan Nelson 20:48

Yeah. That's interesting, though. The burrito, I I feel like I you hear that that debate about if a hot dog a sandwich, but I've never heard the debate if a burrito is a sandwich, but but now you you know it's a slippery slope. Holy smokes. Is it just uh is it just like fillings surrounded by a carb?

Aaron Hoisington 21:04

If so, yeah, I think a burrito has to work. Or if you like stack like two slices of pizza on top of each other, like is that now a sandwich? Like, it sounds like a pretty darn good sandwich. I wouldn't mind that at all. But uh awesome, Ryan. Well appreciate you appreciate you humoring me as always with these uh these questions. And uh uh I would love to hear from the listeners on hot dog sandwiches, whatever it might be, uh let us know. I'm sure this would this uh this question for sure will blow up our ratings without a doubt if I have if I have any uh any idea of how ratings work, so which which I don't. So um thank you so much, Ryan. Appreciate it, man. And uh uh I'll go ahead and uh let you uh play us out. As always, stay the course.

SPEAKER_00 21:43

Thank you for joining us for the Fiscal Physical Podcast. Until next time, happy listening. And as always, stay the course.

Listener Feedback And Wrap Up

SPEAKER_00 21:52

If you have a question or topic suggestions, please email us at podcast at alchemywealth.com. If you enjoyed today's Discussion. Subscribe to the podcast to ensure you never miss an episode. And consider leaving us a rating and review on your favorite platform. This helps other listeners like you find the show. For more resources, you can visit Alchemy Wealth Management's website at www.alchemywealth.com or find your fiscal physical the book on Amazon. We'd be remiss if we didn't mention that personal finance is just that. Personal. Please don't take anything we say as advice. The preceding content is for informational and entertainment purposes only. It's not an offer or a solicitation, nor should it be construed or relied upon for tax, legal, or investment advice. It doesn't consider your personal financial situation or objectives and may not be suitable for you.