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What would you do if you lost your job tomorrow? What can you do if you’ve already been shown the door? With surveys showing anywhere from 48 percent to 67 percent of workers living paycheck to paycheck heading into 2026, the prospect of suddenly losing a job can be scary.
How can you stabilize your finances until you find a new job? We suggest these five moves:
Here’s a more detailed look at how to take charge and make the best of a bad situation.
1. Apply for unemployment benefits
“The first thing one should do when one loses a job is to file for unemployment,” said David R. Silversmith, a CPA, CFP® professional, and senior tax manager at PKF O'Connor Davies in New York, New York. “This is easy and can be done online. It will provide you with some income while you look for another job.”
The time it will take to start receiving benefits varies by state. Apply as soon as you’re eligible, because systems can get overwhelmed when unemployment is climbing, and you may face delays in receiving benefits.
Use your state’s online tools to calculate your estimated benefits. Weekly benefits are capped at a sum that may be much lower than your former paycheck. In California, for example, the weekly maximum is $450, or about $1,800 per month.
State unemployment benefits are taxable income. You may choose to have tax withheld or make quarterly estimated tax payments.
2. Start your job search ASAP
Is there any more important financial move when losing your job than trying to minimize the time you’re unemployed? Thanks to online job platforms and recruiter networks, the search process is faster and more accessible than ever.
“The next thing to do is make sure your LinkedIn profile is up to date,” Silversmith said. After that, apply the specific settings that will make recruiters and human resources professionals aware that you are looking for a job.
This setting is in your profile, which also lets you add a note to recruiters and set the job titles and locations you’re interested in. A premium subscription allows you to directly message recruiters and job posters, apply to jobs as a featured applicant, and see how you compare with other applicants based on your profile.
Don’t limit your search to a single platform. Other top job-search and recruiting sites include, but aren’t limited to, Indeed, CareerBuilder, ZipRecruiter, LinkUp, and SimplyHired. You can also find job sites that cater to certain professions, such as Stack Overflow for software developers and JournalismJobs for media professionals.
Avail yourself of your existing networks, too: there’s no substitute for connecting the old-fashioned way. Letting your contacts know that you’re job hunting is a great way to uncover opportunities and get your foot in the door. Tell them about your skills and the position you’re seeking.
Keep in mind that contract or freelance work can help bridge the income gap while you search. (Related: What freelancers should look for in benefits)
3. Assess your finances
Once you’ve applied for unemployment and started your job search, it’s time to see where you stand financially so you can figure out how you’ll pay the bills and how much time you have to find a new job. With this information, you’ll know whether to take the first job that’s offered to you or hold out for the best fit. (Related: Questions to ask before accepting a job offer)
“Immediately talk to the folks in the HR department and ask whether severance payments will be forthcoming and the amount you'll receive if you qualify,” said Timothy Wiedman, retired associate professor of management and human resources at Doane University in Crete, Nebraska.
“Also ask about payment for unused vacation days and possibly even payment for unused sick days,” he added.
Any payments from your former employer may reduce or eliminate state unemployment benefits until those payments run out. But state benefits rarely last, with a few exceptions, for more than 26 weeks.
Then, Wiedman recommends that you check the current balances in your savings, checking, and money market accounts and the value of any CDs or other non-retirement investments that could be converted into cash fairly quickly should the need arise.
“Totaling these items will provide your current liquid cash position, and that will be useful in planning your new budget,” he said.
If your liquid assets fall short of three to six months' worth of living expenses, rebuilding that cushion should be a priority once you land a new position. If you do have those funds on hand, now may be the time to tap them.
As for your workplace retirement plan — if you have one — when you leave a job, you generally have options to leave it in place, roll it into an IRA, or transfer it to a new employer's plan. (Related: Switched jobs? Consider consolidating your retirement savings)
You may also have the ability to take a loan or hardship withdrawal from your retirement savings, depending on the terms of your plan. (Learn more: 401(k) hardship withdrawals vs. loans: How they work and when to use them)
Additionally, you may be able to get funds through any individual permanent life insurance you own. However, such a move can reduce a policy’s value and death benefit and increase the chance that it may lapse. (Find out more: Cash value in life insurance)
4. Secure health and life insurance
If you’re one of the millions of workers who receive group health and life insurance through work, you’ll likely lose those benefits when you lose your job. Replacing them immediately is essential.
The first place to look is a spouse’s or partner’s plan. Can you enroll in their employer’s group plan?
Of course, for many households, when one person loses insurance, everyone loses insurance. Even if you’re coupled or married, your partner might be on your plan and not have access to workplace insurance. If you have children, losing your job could mean losing their coverage, too.
The next place to look is staying on your former employer’s plan through COBRA. The drawback is that the premiums often become much more expensive at a time when you have less money to pay for them. The average cost of employer-sponsored family health coverage in 2025 was almost $27,000 according to the Kaiser Family Foundation. Under COBRA, you must foot that entire bill because your employer will no longer contribute.
Another option is to buy individual coverage. With a qualifying life event, which includes losing your job, you can enroll through the health insurance marketplace outside of open enrollment. Premium tax credits can lower the cost if your annual income is low enough to qualify.
If you have a health savings account (HSA), those funds are yours to keep and can pay for qualified medical expenses even while you're between jobs. (Related: What is a health savings account (HSA)?)
As for life insurance, you may be allowed to convert your employer’s plan to an individual one. If not, you may want to purchase a plan on your own if anyone depends on your income.
While some health conditions can make premiums more expensive or prevent you from qualifying for certain policies, your options may be better than you think. Don’t assume anything without talking with a financial professional.
Connect with a MassMutual financial professional
5. Cut spending and review your budget
You don’t need anyone to tell you that certain expenses have to go when your income shrinks. But what are the best things to cut and how might you prioritize your bills?
Housing is essential, of course. It’s best to keep making these payments in full and on time to keep your credit score intact and avoid late charges. Also essential are electricity, natural gas, and water, though you may be able to trim your usage.
Transportation to job interviews is key, too, but you might cut out nonessential trips. Pay your auto insurance premiums so you don’t lose coverage, but ask if you could change deductibles or other policy features to save cash without making unreasonable compromises. (Related: Reviewing your budget expenses)
Pricey cable television packages and cellphone plans are obvious candidates for cutting. Keep visual entertainment in your life with an inexpensive streaming service, and venturing beyond the big-name providers can mean big cellphone savings.
Go through your credit card and bank statements for the last three months. See what you normally buy that you can cut out for a while and what you’ve purchased but not used that you might return or resell. Also, are there any other subscriptions you could drop? Maybe meal services, monthly subscription boxes, gym memberships, newspapers, magazines, and the like can go for now.
Paying at least the minimum on your credit cards is also important to keep your credit score up and avoid late fees and escalating interest rates. But if you have student loans, look into deferment or forbearance. You may accrue extra interest by choosing either option but gain temporary relief from monthly payments while you look for work. (Learn more: Seeking relief when student loans are unaffordable)
Conclusion
Losing a job can feel awful. It throws off your routine, casts uncertainty over how you’ll pay the bills, and may fill you with self-doubt. Taking proactive steps to minimize the financial challenges you’ll face can help give you a sense of purpose and a bit more stability.
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Frequently asked questions about losing your job and your finances
Q. What is the first financial step to take when you lose your job?
A. File for unemployment benefits as soon as you are eligible — the process is typically done online and provides income while you search for your next position. At the same time, update your LinkedIn profile and activate job search settings so recruiters can find you.
Q. Should I tap my 401(k) if I lose my job?
A. Withdrawing from a 401(k) before age 59½ generally triggers a 10 percent early withdrawal tax plus income taxes, making it a costly last resort. Instead, explore unemployment benefits, severance, and spending cuts first, and consider rolling your 401(k) into an IRA to preserve the funds. (Related: Borrowing from your 401(k): The risks)
Q. What bills should I prioritize if money gets tight after a layoff?
A. Housing payments, utilities, and auto insurance should stay current to protect your credit score, avoid late fees, and maintain essential coverage. Discretionary expenses — subscription boxes, premium cable packages, gym memberships — are the safest places to cut first.
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Discover more from MassMutual...
What to do when facing a financial emergency
Financial wellness: A key to career success
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This article was originally published in July 2019. It has been updated.
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