The first steps to take when you lose your job | Earnest

The first steps to take when you lose your job

By Erica Gellerman | Published on October 21, 2025

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Finding yourself suddenly out of work can feel like a huge shock to the system. While you may not feel like doing much when you’re first let go, reacting quickly can help you minimize long-term impacts — both to your career and to your mental health. Making a few initial moves, like applying for unemployment and updating your resume, can make you feel more in control of the situation. And even the smallest baby step can help you build confidence and momentum toward finding your next job.

To help you figure out where to start, we put together this cheat sheet. Here’s what to do when you lose your job — baby step by baby step.

Review unemployment guidelines

Unemployment benefits can be tough to navigate, especially if it’s your first time filing. Start by reviewing your severance package if you’re getting one. Not all companies offer severance pay, but if yours does, you should receive documentation from your company’s human resources department. Read this documentation and make sure you understand the details of the agreement.

Next, research your state’s unemployment guidelines, even if you aren’t sure you’ll qualify for benefits. While guidelines are set by the federal government, unemployment benefits are administered by each state individually. You can find resources for your state through the Department of Labor website.

To stay on unemployment benefits, you may be required to meet certain guidelines. Most states require job seekers to disclose all sources of income and provide proof that they’re applying for jobs, attending networking events, taking job interviews, or otherwise making strides toward finding a new role.

Review your health insurance options

If you received health insurance benefits through your former employer, you have two main options once you’ve lost your job: buy a plan through the health insurance marketplace, or sign up for an extension of your current insurance coverage. The latter option was made available by the Consolidation Budget Reconciliation Act (COBRA), so it’s often called “COBRA coverage” or just “COBRA” for short.

COBRA gives you the option to stay on your employer’s health care plan for a period of time after you lose your job. But be prepared to pay more than you currently do: rather than having an employer chip in to cover part of the costs, you’ll pay the entire premium yourself, plus an administrative fee. Your employer should give you details about the COBRA policy option, including how much you’ll pay.

If you decline COBRA coverage, you can apply for a health insurance policy through the health insurance marketplace. The marketplace is only open for enrollment once per year, unless you qualify for a special enrollment period. Losing your job, and your job-based health coverage, is an event that qualifies you for a special enrollment period.

Plans through the health insurance marketplace can be expensive, though there are tax credits available. Depending on your earnings for the year, you may qualify for tax credits that can reduce the cost significantly.

Call your lenders if you’re worried about missing payments

If you’re worried about falling behind on your debt payments while you’re unemployed, take a proactive approach. Reach out to your lenders to let them know your financial situation. Some student loan lenders¹, including Earnest, offer deferment, a Skip-A-Payment option², and other hardship programs in case of job loss or financial emergency. These lenders may be willing to work with you to come up with a payment plan you can afford.

Before you accept an agreement with your lender, make sure you understand all of the details. Consider asking them:

Create a new budget

Your income has taken a cut, so now is a good time to rework your monthly budget. Even if you start getting unemployment checks, your income will likely be less than what you were previously making. If you don’t trim your expenditures to match, you could drain your savings quickly.

Even if you have an emergency fund, consider leaving it untouched for as long as possible. Cut your expenditures, take on a side gig, or rely on short-term savings as long as you can. That way, you’ll still have a financial safety net to fall back on if the job hunt takes longer than expected.

Sit down and take a look at your current monthly expenditures. Where can you cut back your spending? Drop your gym membership, cancel subscription services, and try to get creative with your cooking to make your grocery budget stretch as far as possible.

This won’t be your budget forever, so consider making short-term cuts that may feel a little bit painful right now. You can always add things back once you find another job.

File your taxes if you’re due a refund

If the year has recently come to an end and you think you might be due for a tax refund, file your taxes early. That could be crucial cash to help make up for your lost income. The fastest way to receive your refund is by e-file with direct deposit. Keep in mind that if you’re under a certain income threshold, you should be able to file your taxes for free through the Internal Revenue Service( IRS)’s Free File program.

If you’ll owe the IRS money but don’t think you’ll be able to pay your tax bill when it’s due, you can work with the IRS to create a payment plan. Payment plans that are shorter than 180 days won’t incur any setup fees.

Update your LinkedIn and resume

Now that you have some of the basics covered to help you adjust to being unemployed, it’s time to start preparing for your job search. Take some time to update your LinkedIn profile with any new skills since you last made updates. Also update any other social media accounts a potential employer could see. Finally, update your resume and cover letter outline to include your most recent information so you can quickly customize it for a hiring manager.

Consider asking for outside help

It can be tough to justify an extra expense when you’re out of a job, but sometimes investing in yourself can pay big dividends by helping you find a new job — and start earning a paycheck — sooner. If you’re feeling overwhelmed by the job search process or simply don’t know where to start, consider hiring a career coach, who can give you feedback on your resume and help you practice for interviews. A good coach can also help you figure out your next move, start a new career path, or help you identify the skill sets you need to be competitive in your field.

You can also reach out directly to recruiters in your industry. Recruiters have an insider’s view of the job market and may be able to connect you with a new role. Send a polite personalized message on LinkedIn (or via email if you have a direct contact). Let the recruiter know you’re looking for work, briefly mention your strengths and what you’re looking for, and ask them to keep you in mind for any new opportunities that arise.

Look into refinancing your student loans

Refinancing your student loans is another way to free up room in your monthly budget. You’ll need some form of income to apply, but it’s a great option if you’re trying to build up your emergency fund to insure against future layoffs — or if you’ve just taken a lower-paying interim job and need to temporarily trim your expenses. When you refinance, you essentially exchange all or some of your current student debt for a new loan with a new lender. This can give you the opportunity to extend your loan term, which could reduce your monthly payment. If you meet your lender’s eligibility requirements, you could also qualify for a lower interest rate. If you get a lower rate but keep your loan term the same, that could both lower your monthly payment and save you money over the life of the loan³.

Losing a job can turn your life upside down. But taking immediate action can help put you back in the driver seat. If you’re ready to look into refinancing, consider checking your rate with Earnest. We let borrowers choose from a range of custom repayment options so you can find a plan that works for your schedule. We also let borrowers skip a payment once per year without penalty if you need a little extra breathing room in your budget. Checking your rate is fast, free, and it won't affect your credit score.