How To Manage Your Finances After a Layoff

By Heather Castle
Source: Birmingham Business Journal

With the news of the bankruptcy filing and the recent layoffs at Walter Energy and other companies, I am finding many employees have questions about how to manage financially after a lay-off.

My father, a third generation coal miner, recently retired from the Walter Energy (NYSE: WLT) after 25 years of service.

I have seen firsthand the long hours and tough work that men and women dedicate to the mining industry. For anyone who has ever experienced a layoff, you understand the uncertainty and fear that often arises. Here are three tips to help reduce fear and manage financially in times of transition:

1. Don’t panic.

Ask the HR department if they have names or can provide references for local employment services. Many of these services offer help ranging from resume writing and interview skills to finding temporary or permanent employment opportunities. Additionally, make sure to understand your options for insurance continuation through COBRA. Remember: There are resources available make sure to use them.

2. Review your budget and Emergency funds.

When evaluating your budget you should divide your expenses into two groups: essential and non-essential. Essential expenses are the ones you must pay and non-essential expenses cover things you like to do or purchase.

Cut out or cut back on as many of the non-essential expenses you can. Get your family involved in the conversation, ask them for input and ideas to reduce spending.

Once you have reduced your spending look at your emergency fund. Most financial planners recommend having between 3 to 6 months of essential expenses in cash. I would recommend having emergency funds that cover between 6 months and 1 yr. of living expenses.

Understanding your budget and determining how long you can cover your family’s living expenses can help provide a better sense of calm. It will allow you to focus on other planning needs.

3. Know your options regarding 401k plans.

When you separate service from a company you typically have 4 options available to you with your 401k plans. 1) You can leave your funds as they are in the current plan (this is typically not offered if a company has declared bankruptcy so you will want to check with your HR department to know for sure), 2) rollover your funds to another employer sponsored qualified plan, 3) rollover your funds into an IRA, or 4) take a lump sum distribution.

If you decide to rollover your funds, the recommend method is using a “direct” rollover. A direct rollover goes from carrier to carrier and you will not be subject to the 60-day window as you would be if you were to receive the funds yourself.

Employees should be cautioned when taking lump sum distributions. Electing to take a lump sum distribution means that you have received those funds as income. By doing this, the money is subject to income tax and if you are younger than 59 ½ you may incur a 10% early withdrawal penalty assessed by the IRS.

Consulting with a tax advisor and financial advisor is best prior to making any decisions. They can help you with many areas of concern such as evaluating your budget, understanding your emergency funds, helping you evaluate the best options when electing to continue COBRA insurance, and what to do with your 401K.

If you find yourself laid off remember to stay calm so that you can ask questions and clearly evaluate your options. By doing this you will greatly improve your ability to cope with the transition.



Heather Castle

I am originally from Virginia and grew up in Tuscaloosa, Al.  I completed both of my degrees at the University of Alabama.  My undergrad degree in Finance and then later my MBA from the Manderson Business School through their Executive MBA program. 

I started Castle Wealth Advisors, LLC because I wanted to provide ethical and approachable financial planning and investment management to individuals and business owners, concerned with their financial futures, regardless of age, sex, race, or net worth.

I've always believed clients should work with reputable, qualified, and experienced advisors.  So it was important to me to gain industry experience as well as pursuing additional industry specific designations.  I have passed the following licensing exams:

     Series 7, General Securities Representative

     Series 66, Investment Advisor Representative 

     Series 9 & 10, General Securities Sales Supervisor

     California Life, Health, and Variable Insurance (License #0K01554)

I have been in the financial services industry since 2006 and have work with many differing type of clients over the years.  One thing I know to be true, everyone wants to feel heard and cared about.  Meaning everyone I have ever worked with wants to feel like their desires, wants and needs have been heard and taken into consideration when speaking about their personal financial matters.

Many people have the same goals, they just express them differently, and then there are a few who’s view and desires are completely different.  This is one of the aspects I love about my job.  The PEOPLE!  I get to meet some many interesting people and they challenge me daily.  No day in my line of work is the same.  Today I could be planning for a family who owns a small business and tomorrow working with a women going through a painful divorce.  Listening and building financial plans and strategies around personal needs is why many of my clients have said they do business with me and have stayed with me. 

Another reason I love my job… I get to truly HELP people.  I get to make a living and provide for my family while helping others.  Over my career I have felt a need to dive deeper into financial planning and working with high net worth individuals who have greater planning and investing needs.  Listed below I have highlighted a few of the areas I specialize in:

·      Women in transition (divorce/ death)

·      Corporate Executives

·      Young Entrepreneurs

·      Small Business Owners

·      Family with Special Needs Members

·      Complex Retirement and Estate Planning Needs

Currently I live in Brentwood and really enjoy the West Side of Los Angeles.  I am actively involved with the Junior League of Los Angeles.  I have a passion for trying new things and new experiences.  So, in my free time I love traveling and scuba diving.  I also am interested in learning French, taking pilot’s lessons and dancing the tango!