How Long Will Your Money Last After a Layoff?

The runway formula

Your financial runway is the number of months you can cover your bills before your available money runs out, assuming no new income arrives. It's a single number, and it's the most useful thing you can calculate in your first week after a layoff — more useful than a full budget, because it tells you how much time pressure you're actually under.

Each of the four inputs has a common mistake attached to it. Let's go through them one at a time.

Step 1: Count your liquid savings — only liquid savings

Include checking and savings account balances, plus any money market or brokerage funds you'd genuinely be willing to sell within days if needed. Do not include:

• Retirement accounts (401(k), IRA) — early withdrawal typically triggers a 10% penalty plus ordinary income tax, which can eat a third or more of what you withdraw.
• Home equity — not accessible on a timeline that helps you in month two.
• Money you've mentally earmarked for something else — an emergency fund only works as an emergency fund if you count it as available, but be honest about anything already committed (a wedding, a down payment) that you're not actually willing to touch.

Step 2: Calculate severance after tax, not before

This is the single most common overestimate. Severance is taxable income — subject to federal income tax, Social Security, and Medicare — and employers frequently withhold it at a flat 22% federal supplemental rate rather than your normal paycheck withholding. State tax may apply on top of that.

A rough rule of thumb: take your gross severance and multiply by 0.72–0.78 to estimate take-home pay, depending on your state and tax bracket. If your severance is paid out over several paychecks rather than a lump sum, use the actual net amount from your first severance paycheck as your reference point.

Step 3: Add your total expected unemployment

Multiply your state's estimated weekly benefit by the number of weeks you're eligible (most states offer 26 weeks, though this ranges from 12 to 30 depending on the state). Two details commonly get missed:

• Severance can delay your start date. Some states won't begin paying unemployment until your severance period ends. Check your specific state's rule before assuming the two run concurrently.
• Unemployment is taxable income too. It's rarely withheld automatically unless you opt in — factor that into any separate tax-planning estimate, though for runway purposes you can generally use the gross weekly amount since withholding is optional.

See exact weekly maximums and duration for every state in our unemployment benefits by state guide.

Step 4: Find your real monthly expenses — including the ones that just went up

Pull your last two to three months of bank and credit card statements rather than estimating from memory; actual spending is almost always higher than remembered spending. Then account for costs that increase specifically because of the layoff:

• Health insurance. If you were on an employer plan, your monthly cost is likely to rise significantly under COBRA or a marketplace plan. See our COBRA vs. ACA comparison for real numbers.
• Any benefit that quietly disappears — commuter benefits, phone stipends, wellness reimbursements, or a company laptop you now need to replace.

Separate fixed costs (rent, insurance, minimum debt payments) from variable ones (groceries, entertainment, discretionary spending) — this split matters for step 6 below.

Worked example

Here's the formula applied to a hypothetical person with $9,000 in savings, 8 weeks of severance at a $2,200/week net rate, and eligibility for 26 weeks of unemployment at a net weekly benefit of $450 in their state.

If real monthly expenses (including the new COBRA or marketplace premium) come to $5,900/month:

That's a materially different — and more actionable — number than "I have $9,000 in savings," which on its own would suggest less than two months. Severance and unemployment together are often the majority of a household's actual runway.

6 ways to extend your runway

1. Negotiate your severance before signing. Even two or three additional weeks can add a half-month or more of runway. See our severance negotiation guide.
2. Compare COBRA against ACA marketplace plans. Since your income just dropped, you may qualify for subsidies that make marketplace coverage significantly cheaper than COBRA.
3. Cut fixed costs before variable ones. A renegotiated car payment or a paused subscription saves money every single month for the rest of your runway; a one-time grocery cut only saves once.
4. File for unemployment immediately — delaying doesn't just cost the weeks you wait, it can shorten your total benefit window in some states.
5. Consider short-term or freelance income even at reduced pay — extending your runway by even 3–4 weeks materially reduces financial pressure during a job search.
6. Recalculate monthly, not just once. Your runway changes as expenses shift and unemployment payments begin — use our budget cutter tool to see the impact of specific cuts instantly.

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