How to Budget for Potential Layoffs: Avoid the Panic Premium

The “panic premium”: the hidden cost most people miss

Look, the real budget risk in a layoff isn’t just the paycheck going quiet. It’s reaction time. The cost shows up in the first 30-60 days when stress is high and you’re making fast, expensive decisions, late fees, swiping high-APR cards, cashing out retirement because the rent clock doesn’t care. I call that pile-up the “panic premium,” and it’s sneaky-big. The Federal Reserve’s G.19 data shows the average credit card APR on accounts assessed interest was about 22-23% in Q2 2025, call it ~22.8% if I remember correctly. Carry $4,000 for two months at that rate while you’re between paychecks, and you’ve burned roughly $150 in interest before you even blink. Speaking of which, the CFPB reported typical card late fees averaged about $30 in 2022; tack on a couple of those plus overdrafts and you’re paying for stress, not stuff.

Here’s the thing: waiting until the layoff notice hits is costly because cash flow turns lumpy right when your bills stay smooth. Severance (if any) can show up weeks after your last day, many states still have a one-week waiting period before unemployment benefits, and health coverage transitions create awkward timing gaps. The result? People raid 401(k)s in a rush, incurring a 10% early withdrawal penalty if under 59½, plus income taxes. I’ve watched smart folks do this. Honestly, I wasn’t sure about this either early in my career, and I learned the hard way watching a colleague turn a temporary gap into a year-long credit hangover.

Panic premium = the extra cost you pay in the first 30-60 days after a job shock because decisions are made under pressure (interest, fees, penalties, bad timing).

What’s different this year? Roles are shifting faster, projects pause mid-quarter, and bonus timelines are choppier. In 2025, companies are running tighter approval cycles and killing initiatives sooner; that means variable comp gets yanked or delayed. Even in sectors that are hiring, offers take longer to finalize. Rates are still high compared to the pre-2020 era, so revolving debt is pricier and mistakes compound. The market’s not terrible, it’s just stop-and-go, and that “go” can arrive a month later than your landlord wants.

So, here’s what you’ll learn next, and why you should set this up while you’re calm, not when HR sends a calendar invite you didn’t ask for:

• Why waiting costs real money: late fees stack, card APRs near ~23% eat your cushion, and rushed withdrawals trigger taxes and penalties. Even one missed utility + one card late fee + two months of interest can easily run $150-$300. That’s the panic premium, in dollars.
• How to quantify your first-60-days cash gap: we’ll build a simple, no-drama worksheet, essential bills, minimum debt payments, insurance, groceries, transit. Then subtract likely income timing: severance arrival, unemployment start date, PTO payout. The gap you see is the one you fund in advance.
• What’s changed in 2025: project volatility and bonus variability mean your “average month” is a myth. We’ll adjust your plan for lumpy inflows, including equity vesting that might pause or shift.
• Mindset shift: you’re building a system, not just trimming lattes. A pre-set bill order, payment calendar, and a small, dedicated panic-premium buffer beats heroic willpower. I think most of us overrate willpower and underrate automation.

Anyway, the goal is simple: remove speed from the equation so you don’t pay for hurry. Set the rules now, prioritize housing and insurance, sit on high-APR balances as little as possible, and pre-approve your own moves. Actually, let me rephrase that: future-you shouldn’t have to think. Because when you don’t have to think, you don’t pay the panic premium.

Build your runway: months of safety, not vibes

Here’s the thing: you need a clear number that tells you how many months you can keep the lights on if your paycheck stops. Not a feeling, not “I think we’re fine,” a number. I call it runway. And because this year is jumpy, project delays, hiring freezes, RSUs vesting on weird cycles, you want a simple model you can update every Friday in about five minutes while the coffee’s still hot.

Step 1: Calculate your Core Burn (the bare-minimum monthly spend that keeps you solvent and insured):

• Housing: rent or mortgage + HOA + property taxes if you escrow separately
• Utilities: power, gas, water, internet, phone (lowest workable plan)
• Food: realistic groceries + basic household supplies (drop restaurants for the model)
• Insurance: health, dental, vision, renters/home, auto, life (minimum viable)
• Minimum debt: student loans, credit cards, auto loans, only the minimums for runway math
• Essential transit: gas, transit pass, parking, basic maintenance (no upgrades)

Tip: make Core Burn painfully honest by looking at the last three months’ statements and using the highest of the three for each category. Average months are a myth in 2025, and I don’t say that lightly.

Step 2: Add timing, because cash flow kills otherwise

• Pay cycles: biweekly vs. semi-monthly matters for gaps; map your actual deposit dates
• Due dates: rent on the 1st, card minimums on the 12th/25th, car note on the 20th, write them down
• Annual/quarterly premiums: car and homeowners insurance, property tax, Amazon renewal (yeah, it counts)
• Known one-offs: dental work you’ve scheduled, kids’ tuition deposit, that trip you already paid a deposit for

I keep a one-page calendar that shows the next 10 weeks of cash in/out. Speaking of which, if your health plan premiums are deducted pre-tax from payroll now, remember they’ll come post-tax if you move to COBRA during a gap, so build that into the month it hits.

Step 3: The runway formula

(Liquid cash + near-cash + expected net severance + unemployment) ÷ Core Burn = Months of Runway

• Liquid cash: checking/savings you can access today
• Near-cash: HYSA, money market, short Treasuries maturing within 3 months
• Severance (net): what actually lands after taxes and benefit offsets, timed to when it arrives
• Unemployment: state UI and timing. The U.S. Department of Labor reports state UI typically replaces about 38% of prior wages on average (2023 data), often up to 26 weeks depending on the state. Many states have a one-week waiting period before benefits start, so don’t count day-one money.

Reality check for 2025: bonuses and RSUs are uneven. Count equity and variable comp only when it’s vested and paid, not when it’s scheduled. I’ve had two clients this year whose grants paused after org changes; the paperwork lagged, the cash didn’t show. Anyway, treat all unvested anything as zero.

Step 4: Stress-test it

• If your partner’s income could pause (or childcare costs rise if they work more), run a “minus partner income + higher childcare” scenario.
• Run a “no severance” scenario. Yeah, it hurts. Better to know now.
• Assume medical premiums jump 2-4x if you go COBRA for a while, depends on your employer subsidy. I once underestimated this and, you know, it wasn’t my favorite email to send a client.

Why this matters: Bankrate’s 2024 survey found only 44% of Americans could cover a $1,000 emergency with savings. That stat isn’t here to scare you, it’s a reminder that liquidity is the plan, not the afterthought. Markets have been choppy this year, with rate-cut chatter moving yields week to week, so selling investments under pressure can be costly; cash buys you time.

Step 5: Build the weekly update habit

1. Update balances: checking, HYSA, money market, near-term Treasuries
2. Recalculate Core Burn if a bill changed (insurance renewal, new minimums)
3. Re-map the next 10 weeks of inflows/outflows: deposit dates, rent, premiums, one-offs
4. Recompute runway and note the change: “5.2 months → 5.0 months”

If layoffs start popping up in your company Slack rumor mill, switch to a twice-weekly check. It’s boring, I know, but boring is cheap. And if your number is under 3 months, prioritize cash-building ahead of prepaying low-rate debt, yes, even if it feels wrong, because optionality beats optics when HR emails land. I was a hardliner on debt prepayment in my 30s; now I’m older, a bit less certain, and a lot more protective of liquidity.. but that’s just my take on it.

Two budgets, two outcomes: your pre-layoff and “oh-crap” plans

So, here’s the thing: you don’t want to be building a budget from scratch the day HR pings you. Set up a two-tier system now and you can flip into austerity inside 24 hours. Decision lag is expensive. Cash buys you time, and time keeps you from selling investments on a bad Wednesday when yields and prices aren’t in your favor. As of September 2025, top high-yield savings accounts are hovering roughly in the 4-5% APY range (down from those eye-popping 5%+ peaks last year), so parking a bigger cash buffer doesn’t feel like dead money.

Pre-layoff budget (normal life, with a quiet tilt to cash)

• Redirect 5-15% of take-home pay into cash reserves. If that sounds high, start at 5% for two pay periods and bump it by 1-2% each month. You shouldn’t feel it as a lifestyle downgrade; the goal is stealth, not spartan.
• Use a zero-based approach: every dollar gets a job, including “future rent” and “utilities buffer.” The math is simple, the discipline is the hard part. I’m still figuring this out myself because, you know, kids’ activities multiply.
• Envelope categories for essentials: rent/mortgage, groceries, insurance, transport, minimum debt payments. Keep these digitally fenced off. Actually, wait, let me clarify that: fenced off means you don’t “borrow” from them on a Friday night.
• Why prioritize cash? The Fed’s own 2023 SHED survey reported 63% of adults could cover a $400 emergency expense with cash or its equivalent (Federal Reserve, 2023). That still leaves a lot of people stretched. Your goal is to be on the covered side with room to spare.

Austerity budget (“oh-crap” mode you trigger if notified)

• Automatic cuts list ready to execute the same day: subscriptions, dining out, travel, elective care, premium streaming tiers, monthly boxes, and “nice-to-have” software. You don’t negotiate with yourself; you just do it.
• Sequence of cuts you follow in order: (1) pause investing beyond any 401(k) match, (2) halt extra principal payments on mortgage/loans, (3) delay big purchases and non-urgent home projects, (4) drop to the cheapest mobile/internet plans you can tolerate for 60-90 days.
• Checklist to automate “layoff mode”: stop autosaves to taxable brokerage, increase paycheck cash sweep to 100% of take-home, turn off autopay for non-essentials, turn on calendar reminders for due dates so you don’t miss minimums, and reroute any windfalls (refunds, RSUs vesting if they still vest, weird rebates) straight to your HYSA.

Why the speed matters

Look, I’ve watched too many friends burn weeks deciding what to cut while the checking account drips lower. The Bureau of Labor Statistics reported that in 2024 the median duration of unemployment hovered around roughly 9 weeks (BLS, 2024). That’s the median; plenty of people run longer. Your plan is to make week one as cheap as week nine. Enthusiasm spike here because checklists actually work, seriously, when your brain is fried after that “we’re restructuring” call.

Tools that actually work right now

• Zero-based budget for clarity and speed. If it’s not assigned, it doesn’t get spent.
• Envelope categories for essentials, physically or digitally. Groceries is groceries. Not “groceries + patio furniture that was on sale.”
• Calendar reminders for due dates and insurance renewals. Earlier this year my own renewal jumped and I almost missed the new minimum, boring admin saved me a fee.

Anyway, the point is to pre-write your decisions so you can execute in 24 hours. You may tweak a line item or two, human nature, but the framework holds. If rumors heat up later this year, tighten the pre-layoff savings rate by a couple points. If things cool off, keep the habit. And yeah, occassionally I over-save to cash when markets look choppy; then I re-balance. Optionality first, optics second.

Cash where it counts: parking reserves in 2025

Look, the job of emergency cash is simple: don’t lose value, be there when you need it, and earn something while rates are still decent. As I mentioned earlier, simplicity wins. Here’s a clean, tiered setup I use with clients, and yes, in my own household when things feel wobbly.

Tiers that actually work

• Tier 1 (checking): 1-2 months of essential expenses. This is your instant-access buffer for bill timing. Don’t chase yield here; chase reliability. If your monthly burn is $4,000, keep $4,000-$8,000 in checking.
• Tier 2 (high‑yield savings): 3-6 months. Keep this at an FDIC‑insured bank (up to $250,000 per depositor, per bank, per ownership category). Earlier this year, plenty of online banks were paying around 4-5% APY, while the FDIC’s national average savings rate in 2024 hovered near 0.5%, that gap is the point. Verify the actual APY you’ll recieve after promos end.
• Tier 3 (extras): no‑penalty CDs or short T‑bills. For anything beyond six months of expenses, I like no‑penalty CDs or laddered 4-13 week Treasury bills. The idea is liquidity without guessing your layoff date.

Avoid early‑withdrawal traps

Here’s the thing: locking a 3‑year CD because the sticker rate looks great can backfire if you need the cash in month seven. Prefer no‑penalty CDs, exactly what it sounds like, or a ladder of 4, 8, and 13 week T‑bills that auto-roll while you assess risk. For context, 4-13 week T‑bills were yielding roughly around 5% late last year (2024). Rates have drifted a bit this year, but the ladder still gives you near‑term cash windows. Actually, wait, let me clarify that: the point isn’t the perfect yield, it’s to avoid paying penalties when life happens.

Brokerage sweep rates aren’t always your friend

Sweep accounts in brokerages can pay wildly different rates, from near‑zero to competitive, depending on the firm and which sweep product you selected by default. Confirm two things: 1) the specific APY on your sweep or cash management account, and 2) the protection type. Bank sweeps usually carry FDIC insurance (again, $250k per depositor per bank), while brokerage cash and securities sit under SIPC, which protects against broker failure up to $500,000 total ($250,000 limit for cash). SIPC doesn’t guarantee your money market fund’s price or shield you from market losses; it’s not the same as FDIC. I’ve seen people assume the sweep is “fine” and leave thousands earning 0.01%, painful.

What not to do with emergency funds

• Don’t park this money in equities, long‑term bond funds, or crypto. Volatility doesn’t care about your severance timeline.
• Don’t bury it in a 401(k) or IRA you’d pay penalties to access before age 59½. Penalties plus taxes… yeah, no.
• Don’t stretch for yield with callable CDs or exotic stuff you don’t fully understand.

HSAs as a medical buffer

If you’ve got a Health Savings Account, it can double as a medical emergency reserve. In a year like 2025, when layoffs are a real talk at a lot of firms, keep a portion of your HSA in cash or a conservative option, especially if losing employer coverage would spike your out‑of‑pocket costs. You can invest the rest for the long term, but if layoffs look likely, dial back risk for a bit. I’ve done this myself during a shaky quarter, belt and suspenders. It’s not elegant, but it works.

Quick checklist: Is your checking buffer 1-2 months? Are you earning a real APY in HYSA (not a teaser rate)? Do you have a 4-13 week T‑bill ladder or a no‑penalty CD for the overage? Are FDIC/SIPC protections clear? If any answer is “uhh, not sure”… fix that this weekend.

Anyway, if conditions improve later this year, you can loosen the ladder roll frequency and tilt back to your investment plan. If rumors heat up, push more into Tier 2 and Tier 3. Optionality first, yield second, but that’s just my take on it…

Severance, taxes, and benefits: what actually hits your account

So, here’s the thing: severance looks big on paper and then the IRS and your state take their cut, and, poof, the number shrinks. Don’t build a budget off the gross figure. Most employers process severance as supplemental wages. As of 2024, the federal supplemental withholding rate is 22% up to $1,000,000 and 37% above that. Social Security and Medicare still apply. States do their own thing, some use a flat supplemental rate, some blend with your regular withholding, and a few have no income tax at all. I’ve seen folks in high-tax states assume “it’ll net like my paycheck,” and it doesn’t. Anyway, sanity check it with a calculator before you start committing cash to big expenses.

Unemployment benefits are federally taxable. You can ask the state to withhold 10% for federal taxes using Form W-4V; it’s optional, but skipping it can set you up for an April surprise. States vary: some tax unemployment, some don’t, and some let you elect state withholding too. If you’re not sure, assume a tax bite and set aside cash. Honestly, I’d rather be a little over-withheld than write a check next spring when cash is tighter.

COBRA and health coverage: you’ve got a 60-day election window after your COBRA notice, and coverage can run up to 18 months. Premiums can be sticker shock because you pay the full employer plan cost plus up to a 2% admin fee. For context, KFF’s 2023 Employer Health Benefits Survey reported average total annual family premiums around $23,968, with employers covering a big chunk during employment, when that goes away under COBRA, you see the whole bill. Price ACA marketplace plans too; the special enrollment window opens when you lose coverage, and premium tax credits can make an ACA plan cheaper than COBRA, especially if severance and no W-2 wages lower your annual income this year. Speaking of which, double-check your projected 2025 MAGI before you pick a plan, subsidies hinge on it.

FSAs and HSAs: FSAs are use-it-or-lose-it unless you elect COBRA for the FSA, which is a thing but not always practical. You’ll usually have a run-out period to submit old claims, but you can’t incur new expenses after your employment end date unless you keep the FSA via COBRA. HSAs are portable, you keep the account, keep the tax benefits, and can spend it tax-free on qualified medical expenses. I occassionally keep a chunk in cash in my HSA when layoffs are in the air, belt and suspenders.

401(k) choices: you can usually leave the money in the old plan, roll it to an IRA or a new employer plan, or, yes, cash out, but cash-outs trigger income tax and typically a 10% early distribution penalty if you’re under 59½. There’s a separation-at-55 exception for qualified employer plans (50 for certain public safety workers), which can help if you need to tap funds before retirement. I might be oversimplifying, but the quick triage is: avoid cashing out if you can, compare fees/investments, and keep rollover destinations clean to preserve backdoor Roth options later.

Equity comp checklist (where budgets really go sideways):

• Confirm vesting dates around your termination, some firms vest on your last day, others don’t. If there’s any layoff acceleration in your plan docs, get it in writing.
• Know the post-termination exercise window for stock options. ISOs often have 90 days before they flip to NSOs. Taxes can change on a dime there.
• Ask if the company is extending exercise windows for laid-off employees this year. It’s become more common in tech again in 2025, but it’s not guaranteed.
• For RSUs, confirm whether unvested units are forfeited immediately or if there’s a partial vest on the separation date.

What’s negotiable vs. what’s taxable: severance amount and timing are sometimes negotiable; tax treatment isn’t. You can occassionally negotiate a partial COBRA subsidy in the severance package, or ask that the company pay out unused PTO separately, but whether it’s taxed is still wage income. You might also negotiate vesting acceleration if your level/tenure supports it. I’ve seen companies agree to a later termination date to secure one more vest, small thing, big dollars.

Quick math guardrails to keep your budget honest:

• Start with gross severance. Apply 22% federal withholding (or 37% if you’re in seven-figure land), add 7.65% for FICA if applicable, then layer your state estimate. That gets you a conservative net. Adjust later if your W-4 tweaks reduce withholding.
• Set federal 10% withholding on unemployment unless you’re deliberately managing for ACA subsidies and have cash to cover the tax next April.
• Price COBRA at the full sticker +2%, then compare to ACA net of subsidies. Don’t forget deductibles and out-of-pocket maximums, cash flow matters if care is likely.

Market-wise, layoffs in 2025 are still popping up in pockets, media, some SaaS, and a few cyclical industrial names cutting into Q3 as demand wobbles. Severance terms feel tighter than last year, and with rates still higher than the 2010s norm, carrying a bigger cash buffer isn’t paranoid, it’s practical. Actually, let me rephrase that: it’s necessary if your runway depends on what really hits your checking account.

Bottom line: gross is theater, net is rent. Get the withholding right, shop health coverage, and don’t forget the equity fine print, because that’s the stuff that quietly moves your budget from “okay” to “uhh, we’re short.”

Keep the lights on: debt, housing, and insurance triage

Here’s the thing, when cash flow tightens, order matters. You call housing first, then utilities/insurance, then everyone else. Why? Because missed rent or mortgage hits your stability immediately, and utilities/insurance keep basic protection in place. Credit cards and personal loans can flex more, if you manage the optics and the math.

Housing first: Contact your landlord or mortgage servicer early, like before the first missed payment. Ask about hardship policies, temporary reductions, forbearance, or payment deferrals. Most servicers still have post‑pandemic hardship playbooks, even if they don’t advertise them. If you have a mortgage, get clarity on whether skipped amounts are added to the back of the loan (deferral) or require a catch-up schedule. For renters, even a partial, on-time payment paired with a written plan tends to buy goodwill, probably more than you expect. And keep proof of income change handy; you’ll need it for any formal agreement.

Debt strategy: Switch to minimums on every unsecured debt to preserve cash. Don’t feel guilty, that’s triage. If a 0% balance transfer is on the table, run the numbers first. Many cards charge a 3-5% transfer fee. Example: moving $5,000 at a 5% fee costs $250. If your alternative is carrying that balance for 12 months at a 22% APR (typical card rates have hovered around 20-22% since 2024), you’d pay roughly $1,100 in interest, net savings ≈ $850, but only if you can retire the balance during the promo and you’re confident about income later this year. If your income is still fuzzy, don’t chase teaser rates you can’t finish.

Student loans: Use income-driven repayment. The SAVE plan, rolled out in 2023, calculates payments as low as $0 based on income and family size. It shields income up to 225% of the federal poverty line and uses 5% of discretionary income for undergrad loans (a weighted average applies if you have grad loans at 10%). If you lost your job, recertify ASAP rather than waiting for your annual date, payments can drop to $0 quickly, which is exactly what you want while you stabilize.

Insurance: Keep auto and renters/home coverage active, liability gaps are expensive. You can dial premiums by raising deductibles carefully and removing optional bells and whistles. If your driving plummets, price pay‑per‑mile, clients who cut miles by half have saved something like 15-30% in my experience, depending on the carrier and state. Anyway, the point is: adjust coverage, don’t lapse. A lapse can spike rates for 6-12 months after you turn it back on.

Protect credit optics: Two quick levers that tend to help scoring: keep credit utilization under 30% on each card and across total limits (under 10% is even better if you can swing it), and request proactive credit line increases before an income change is reported. Issuers conduct periodic account reviews, if utilization jumps and your limits are tight, you might see surprise limit decreases, which is the last thing you need.

Look, utilities matter too. Call power, gas, and internet providers to ask about hardship plans, payment arrangements, or budget billing. Keep service active; disconnections come with fees and headaches. I was on a call last year with a utility that quietly offered a six-month budget plan only if you asked, no web mention. It’s ridiculous, but that’s how it goes.

So basically: preserve the roof, the lights, and the policy. Everyone else gets minimums while you keep options open and avoid dings that echo for months.

• Call order: Housing → utilities/insurance → unsecured lenders.
• Docs to keep handy: layoff notice, severance letter, unemployment/benefit summaries, last two paystubs. You’ll be asked to upload them, recieve that request once and you’ll be glad you saved the files.
• Negotiation tip: When lenders hear “temporary loss of income,” they usually have a script, hardship for 3-6 months. Get the terms in writing and calendar the end date so you’re not surprised.

Actually, let me rephrase that, cash buys time, and time preserves choices. You may not love the compromises, but they keep you in control.. but that’s just my take on it.

Frequently Asked Questions

Q: How do I set up my budget to avoid the “panic premium” in the first 30-60 days after a layoff?

A: Look, assume timing will be messy and build a 60-day bridge. Here’s a simple playbook:

• Triage bills: keep housing, utilities, groceries, insurance, and minimum debt payments first. Everything else goes to pause/skip.
• Call creditors before you miss: ask for hardship plans, payment deferrals, or interest reductions. Many will help if you call early.
• Autopay minimums from a dedicated “bridge” checking account so a brain-fog day doesn’t trigger late fees.
• Cash buffer target: 1-2 months of essentials (not lifestyle). Even $1,500-$3,000 cuts the interest/fee burn a lot.
• Use cheaper debt if needed: a 0% promo or balance transfer can beat ~22.8% APR (Fed G.19, Q2 2025). Just do the math on 3-5% transfer fees and repay before the promo ends.
• File unemployment immediately (day 1). Many states still have a one-week waiting period, you want that clock started.
• Health coverage: line up COBRA vs an ACA marketplace plan (SEP window). Price both before your old plan lapses.
• Income inflows: confirm severance timing and PTO payout dates. If they’re delayed, plan to cover that gap explicitly.
• Quick wins: pause subscriptions, reduce variable spend, adjust due dates to after known inflows. So basically, you’re buying reaction time cheaply so you don’t pay it back expensively in interest and fees.

Q: What’s the difference between an emergency fund and a “panic-premium” buffer?

A: They sound similar, but they’re different tools. An emergency fund is your 3-6 months safety net for big stuff, job loss, medical hits, furnace dies in January. The panic-premium buffer is smaller and tactical: cash for the first 30-60 days so timing gaps don’t force bad decisions.

• Emergency fund: larger, long term, usually in high-yield savings. Goal = sustain life if income stops.
• Panic-premium buffer: compact, liquid, often in checking so bills get paid on time. Goal = avoid late fees, overdrafts, and ~22-23% APR card interest while severance/unemployment/health coverage settle. How much for the buffer? Add one cycle of rent/mortgage + utilities + groceries + insurance + minimum debt payments + health premiums. Example: $1,400 rent + $250 utilities + $450 food + $300 insurance + $200 debt mins + $250 health = $2,850. Fund 1-2 cycles. It’s not meant to preserve lifestyle, just to keep the wheels on.

Q: Is it better to put expenses on a credit card or tap my 401(k) if I get laid off?

A: It depends, but here’s the honest trade-off. Cards are expensive (avg APR ~22.8% in Q2 2025), but flexible. A 401(k) withdrawal triggers a 10% early withdrawal penalty if you’re under 59½, plus income taxes, and it permanently shrinks retirement compounding. I’ve watched people turn a short gap into a long-term hole that way. My pecking order, from least-bad to worst, generally goes:

1. Slash expenses and use your 60-day cash buffer.
2. 0% intro APR card or balance transfer (mind the 3-5% fee and pay it off within promo). Set an automatic payoff plan.
3. Small personal loan at a fixed rate if you need more than a couple months; cheaper than 22%+ revolving.
4. Roth IRA contributions (contributions only) can be withdrawn tax- and penalty-free, use sparingly.
5. 401(k) hardship withdrawal only if you’ve exhausted the above and you’re protecting housing/health. Remember: 10% penalty + taxes can easily exceed the interest you’d pay over a short period. Also, if you still had employment, a 401(k) loan could be an option, but post-layoff that’s usually off the table. So, choose the path that buys time at the lowest all-in cost and doesn’t nuke your future.

Q: Should I worry about missing a payment by a few days if I’m between paychecks?

A: Yes, because the small stuff snowballs. The CFPB reported typical card late fees averaged about $30 in 2022. Add overdraft fees and 22%+ APR interest, and you’re paying for stress, not stuff. A few tips:

• Set autopay to minimums so you avoid late marks. Credit bureaus generally report at 30+ days late, but fees and penalty APRs can hit much sooner.
• If you slip, call and ask for a one-time late fee waiver, success rates are decent, especially if you don’t make a habit of it.
• Align due dates right after known cash inflows (severance, unemployment). Most issuers will move them if you ask.
• Keep a tiny cushion in checking to avoid overdrafts, even if you have to temporarily park less in savings.
• Don’t swipe a debit card into a negative balance; an occassional small charge can cascade into multiple overdrafts. So, yeah, worry enough to put guardrails in place, but not so much you panic. A couple quick calls can save you real money you’d otherwise never recive back.

@article{how-to-budget-for-potential-layoffs-avoid-the-panic-premium,
    title   = {How to Budget for Potential Layoffs: Avoid the Panic Premium},
    author  = {Beeri Sparks},
    year    = {2025},
    journal = {Bankpointe},
    url     = {https://bankpointe.com/articles/budget-for-potential-layoffs/}
}