How to calculate your financial runway after a layoff
By Kyle Shaddox 6 min read Money and runway
The financial runway equation after a layoff is the most useful single number in the first month. It turns a vague “how long can I do this” into a specific count of months, which makes every other decision — what to cut, whether to take a bridge contract, how selective to be on roles — possible to think about clearly.
The math itself is simple. The trouble is in the variables. Most people who feel like they have less runway than they actually do are over-counting expenses or under-counting income. Most people who feel like they have more than they do are forgetting taxes on severance, the real cost of health insurance, or both.
Here is the clean version of the calculation, the variables that go wrong most often, and the sanity checks before you trust the number.
The runway equation
Runway in months equals liquid savings, plus severance after tax, plus estimated unemployment, divided by honest monthly burn.
That is it. The numerator is what you have to spend. The denominator is what you actually spend. The ratio is your runway in months.
The hard part is getting each variable right.
How do I count liquid savings?
Liquid savings is money you can spend this month without forcing a bad decision.
Include:
- Checking and savings account balances
- Money market accounts
- Short-duration brokerage holdings you would sell at near-cost basis
- A small emergency cash buffer if you keep one
Do not include:
- 401(k) or IRA balances — using these triggers tax and penalty
- Home equity — selling or refinancing takes months and is not flexible cash
- Restricted stock or vested options you cannot sell yet
- Long-duration stock with large embedded capital gains you would not normally sell
The point of the runway number is to show how long you can fund the search without forcing a bad trade. Counting money that would cost you 30 to 40 percent to access defeats the purpose.
How much severance do I actually keep?
This is where most runway numbers get optimistic.
Severance is taxable income. Federal supplemental wage withholding is typically a flat 22 percent on amounts under one million dollars. State withholding varies. FICA (Social Security and Medicare) still applies — currently 7.65 percent on the employee side, up to the Social Security wage base.
For a quick runway estimate, subtract 25 to 30 percent of gross severance to approximate federal, state where applicable, and FICA. So a 20,000 dollar gross severance covers roughly 14,000 to 15,000 dollars of expenses, not 20,000.
For a precise number, talk to a CPA. The actual tax owed depends on your full-year income, your state, your deductions, and whether the withholding was set at the standard rate or something else. If your severance was paid as a lump sum in the same calendar year as a full salary, your effective tax rate on that lump may be higher than 22 percent — which means under-withholding and a bill in April.
Two checks worth running:
- Look at the severance net figure on the paystub or check. That is what hit your account.
- Compare it to gross times 0.70 to 0.75 as a sanity check.
If the net is much higher than 75 percent of gross, you are likely under-withheld and should set aside the difference rather than spend it. If the net is much lower, you may be over-withheld and will get some back at tax time — but in the meantime you have less liquid cash than the gross number suggests.
How much unemployment will I actually get?
Unemployment numbers vary widely by state. In 2025, weekly maximums commonly sit in the 400 to 850 dollar range, with some states higher. Duration is typically 12 to 26 weeks. The federal benefit extensions of 2020 and 2021 do not apply now.
To get a real number:
- Search “[your state] unemployment weekly benefit calculator”
- Use the official state agency site, not a third-party blog
- Enter your wages from the relevant base period (typically the first four of the last five completed calendar quarters)
For runway, two cautions:
- Benefits do not start the day of the layoff. Most states have a one-week waiting period. Plan for two to four weeks before the first payment arrives.
- Unemployment benefits are federally taxable. Either elect the 10 percent federal withholding when you file, or set aside the tax yourself. Otherwise April becomes a problem.
For the runway number, take the official weekly amount, multiply by the weeks you expect to claim, and reduce by 10 percent for federal tax (more if your state taxes unemployment). That is what actually shows up in your account.
What is my real monthly burn?
This is the variable most people get wrong, in both directions.
The aspirational version of monthly burn is the budget you have been meaning to follow. The real version is what last month’s statements show. Use the real version.
Pull the last three months of credit card and bank statements. Add everything. Divide by three. That is your real burn. Most people are surprised by the number; some are pleasantly so.
Then make three adjustments for the post-layoff reality:
Add the cost of health insurance
If you elect COBRA, add the full COBRA premium — typically 400 to 800 dollars a month for a single person, more for families. If you go through the ACA marketplace, add the post-subsidy premium plus expected deductible spend. If you go through a spouse’s plan, add the marginal cost they will pay to add you. Health insurance during a layoff is rarely free. The runway math needs to reflect it.
Subtract commuting and work-related costs that ended
If you were spending 200 a month on commuter rail, parking, lunch out, or work clothes, those costs end on day one. Subtract them honestly.
Add what tends to creep up during a search
Search-related costs are usually small — coffee meetings, possibly a new headshot, possibly a resume review. Budget 100 to 200 dollars a month for these. Subscription consolidation can offset most of it.
The adjusted number — last month’s actual spend plus health insurance, minus commute, plus a small search line — is the burn that goes in the denominator.
A worked example
Imagine a single person with no dependents, laid off mid-year:
- Liquid savings: 22,000 dollars
- Severance: 18,000 gross, roughly 13,000 after tax and FICA
- Unemployment: 550 a week for 20 weeks, less 10 percent federal withholding, so about 9,900
- Monthly burn before layoff: 4,200 dollars
- Adjusted burn: 4,200 + 500 (ACA marketplace plan after subsidy) − 250 (commute and work lunches) + 150 (search line) = 4,600
Numerator: 22,000 + 13,000 + 9,900 = 44,900 Denominator: 4,600
Runway: about 9.8 months.
Same person, different mistake: counting severance gross, ignoring health insurance, using the spreadsheet budget of 3,200:
Numerator: 22,000 + 18,000 + 11,000 = 51,000 Denominator: 3,200
Runway: about 15.9 months.
The second number is wrong. It is six months optimistic. The decisions a person makes with 16 months of imagined runway are very different from the ones they make with 10 months of real runway — and the bad version shows up in month four when the math finally catches up.
What the runway number is for
Once you have a clean number, three uses follow:
- Pace. A 6-month runway and a 12-month runway are different searches. With 6 months, you are calibrating on speed; with 12, you can be selective.
- Triggers. Pre-decide what you will do at 4 months, 3 months, and 2 months. The decisions are easier to make in advance than under pressure.
- Conversation. Sharing a real runway number with a partner is hard but it is the foundation of every household decision in the search.
CareerCanopy treats the runway number as a living thing — it updates as severance is paid, as unemployment lands, as expenses settle, and as the search progresses. That is what it is supposed to do. A runway number that never changes is one you stopped looking at.
A short checklist
- Sum liquid savings — checking, savings, short-duration brokerage. No retirement accounts.
- Estimate severance net at 70 to 75 percent of gross, then confirm with a CPA if the stakes are real.
- Get the official weekly unemployment number from your state agency. Multiply by claimable weeks. Subtract 10 percent for federal withholding.
- Pull last three months of bank and card statements. Average. That is real burn.
- Adjust burn for health insurance, ended commute costs, and a small search line.
- Divide. That is your runway.
Recalculate monthly. Severance gets spent, unemployment starts and stops, expenses settle. The runway number is most useful when it is current.