What to Do After Losing or Leaving Your Job: A Complete Guide for Therapists

Leaving your job as a therapist can feel like a plunge into the unknown. That applies whether you’re leaving because you were laid off or quitting by choice.

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But if you’ve just left your job as a therapist—or if you expect to leave it soon—there are steps you can take to smooth the transition and set yourself up for success in the next stage of your career.

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Here’s a complete guide to facing unemployment as a therapist, including the first steps to take to start seeing clients solo and launch your own practice.

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First things first: File for unemployment

When you leave your job as a therapist, the first step you should take is to determine whether you’re eligible for unemployment benefits. If you are, apply for them immediately to minimize gaps in your cash flow.

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Unemployment benefits programs differ considerably from one state to another. You can get a state-by-state breakdown at UnemploymentCalculator.org.

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Generally, these are the steps to follow when filing for unemployment:

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Check eligibility requirements and application guidelines for your state. You can typically find these on your state’s Department of Labor or Workforce Development website.
Gather your information. This usually includes your social insurance number, contact information for your last employer, and the date of your last day of work.
Apply online. Most states allow you to apply online for unemployment benefits.

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Keep in mind that, if you begin to practice privately and earn self-employed income, you may no longer qualify for unemployment benefits from your state. Contact your Department of Labor or Workforce Development department if you have any questions.

Severance for therapists

Your employer may offer you a severance package when you leave the company. A severance package typically consists of additional weeks’ pay, but may include other benefits.

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Employers provide severance voluntarily. Companies are not legally required to provide it.

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Offering a severance package can benefit your employer in a couple of ways. For one, it can cut down on negative press—laid-off employees may be less likely to complain publicly about their employer if they receive cash.

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For another, some severance packages include agreements employees must sign that prevent them from bringing legal action against the employer or publicly disparaging them.

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Accepting a severance package can help give you the financial support you need while you transition to a new job, or even provide the funds you need to launch your own private practice. But it could also prevent you from suing your employer (e.g. in the event you were wrongly dismissed) or talking to the press about your experience.

What is a severance package?

A severance package may include:

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Severance pay. This is usually calculated as one to two weeks’ worth of pay for every year you spent working for your employer. Some employers offer flat rates instead.
PTO pay. You may be paid out for any paid vacation days you didn’t use while employed.
Extended benefits. Some severance packages allow you to keep using employee benefits (e.g. health, dental, life insurance) for a set period after you stop working. You may also keep benefitting from employee perks (like discounts at certain businesses).
Career counselling, job placement assistance, or other services meant to help you find work after you’ve left the company.

How to negotiate severance

When you were hired by your employer, they outlined their severance policy. At that point, you had the opportunity to negotiate a better severance package.

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But you can also negotiate severance when you leave your job. You may refuse to sign non-disclosure agreements or other contracts unless you get a better severance package. You may also offer your employer services in exchange for a better package—for instance, by training your replacement.

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Keep in mind that, in the face of such negotiations, your employer may decide to withdraw the offer of severance. In most cases, it’s within their legal right to do so.

Severance vs. buyouts for therapists

If you’re a federal employee being dismissed as part of the Trump Administration’s cuts, you may be able to choose between a federal employee severance package and a federal employee buyout.

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For the first wave of employees laid off as part of Trump’s cuts, the deadline for this decision was February 10, 2025. Assuming the buyout plan is offered again in the future, any future layoffs will come with new deadlines. Make sure you know which deadlines you have to meet ASAP.

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Both the money received as severance pay or as part of buy-out are taxed as income.

Federal severance pay for therapists

Federal severance pay follows a fairly typical model for severance, paying out employees based on how long they have been employed.

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Specifically, you receive the equivalent of:

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One week’s pay for each year within the first 10 years you worked for the federal government
Two weeks’ worth for each year you worked after the first 10 years
25% annualized severance pay for each additional three months beyond your last year of service.

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You’re allowed no more than 52 weeks of severance pay during your lifetime. For a more detailed breakdown, see the US Office of Personnel Management info page.

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Note that, if you accept a buyout, you do not qualify for federal severance pay.

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You may qualify for severance pay if:

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You’ve been voluntarily let go through no fault of your own (e.g. layoffs, agency closure, staff reduction)
You’ve worked for at least 12 months for the federal government
You served in a full-time or part-time permanent position (i.e. you weren’t a seasonal or temporary employee)
You’re not eligible for immediate retirement benefits

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After accepting a severance package,you are barred to work for the federal government for five years following your dismissal. That includes contract work. You can remove this embargo by paying back 100% of what you received as severance.

The federal employee buyout for therapists

You may be offered the chance to accept a buyout package rather than severance. In order to do so, you’ll need to voluntarily resign from your position.

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For the first wave of staff reductions (those with the deadline of February 10, 2025) the buyout followed an eight month plan. Meaning, if you accepted the buyout, you were guaranteed eight months’ worth of pay.

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Federal employees who accepted the buyout remained on the payroll—they were technically still employed, but with no office duties—until September 30. During that time, they continued receiving paychecks and employee benefits.

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In order to qualify, employees had to:

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Be employed in an Executive Branch agency
Have at least three years of continuous federal government service
Formally submit their resignations and agree to terms set out by the Office of Personnel Management (OPM)

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As with a severance package, employees who accepted the buyout were barred from working for the federal government for five years unless they paid back the total amount of the buyout.

Severance vs. buyout: Pros and cons

Future buyout packages may differ from those offered in early 2025. But based on that particular eight month package, and the federal employee severance package at the time, these are the pros and cons:

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	Severance Package	Buyout (eight months)
Pros	- Lump sum payout - Immediate dismissal (a “clean break”) - Can start working ASAP for a private company	- Continued employment with pay for eight months - Continuation of benefits for eight months
Cons	- Total amount received likely less than it would be with a buyout - Immediate unemployment may create additional stress and pressure	- Ongoing employment may be barrier to starting a new job in the private sector

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Whether you accept a severance package or buyout should depend on your plans after leaving.

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If you plan to seek a job with another employer ASAP, a severance package allows you to leave your position immediately. This avoids potential complications that may arise if, in the case of a buyout, you remained on the federal payroll for eight months.

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If you plan to start your own private practice, an eight month buyout package offers a convenient runway as you transition into self-employment. You can keep collecting a paycheck while your new practice is getting off the ground. A buyout may also be attractive if you rely heavily on benefits like health insurance (e.g. for dependants), and if any gap in health, dental, or vision coverage would cause problems for you or your family.

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Budgeting after you leave your job as a therapist

If you’ve left your job and you don’t have a new one immediately lined up, creating a new personal budget can help you maintain financial stability while you move on to the next phase in your career.

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This new budget is temporary. Keep that in mind especially as you consider how to reduce your personal expenses. You may need to forego “luxury” spending—like entertainment or travel—in order to balance your budget, but it will give you a more stable financial grounding once you’re back in business.

Review your remaining income sources

If you have any additional revenue streams independent of your job, figure out how much you can expect to earn from them each month.

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Even if your remaining income sources add up to a few hundred dollars each month—from a hobby business, for instance—they’re worth taking into account. Even a small amount of money coming in the door can help reduce how much you have to rely on your savings to get by.

Calculate your cash or cash-equivalent assets

How much do you have saved that’s available to spend on expenses while you find your next position as a therapist? How much do you have dog-eared for long-term savings that you would be willing to put to use in the short term?

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This can be tricky—you need to decide how you’re going to spend the assets you currently hold, and that may mean tapping into money you’ve set aside for other purposes. It’s a matter of weighing your short-term needs against your long-term goals.

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One word of advice: Avoid withdrawing money from retirement savings accounts unless absolutely necessary. Doing so may result in penalties, and in many cases funds you access early will be subject to income tax.

Assess your debt

The monthly cost of servicing debt—paying interest on credit cards, for instance—can make up a sizable portion of your expenses. Consider contacting creditors directly to explain your situation and see if you can have fees reduced or deferred.

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For more strategies for dealing with debt, check out our guide to debt management for therapists.

Calculate, then reduce, your expenses

Create a list of all your monthly expenses, including their amounts. You may need to estimate average amounts for expenses like groceries or gas.

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Then split them into two categories: Non-discretionary expenses, expenses you have no choice but to incur (e.g. rent, car payments, utilities, groceries); and discretionary expenses, expenses you choose to incur (e.g. dining out, entertainment, travel, non-essential clothes).

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Your goal now is to reduce your discretionary expenses as much as possible. But be realistic. For instance, if you’re in the habit of eating meals out three or four times a week, and you reduce your restaurant spending to zero, you may find it hard to stick to your goals. On the other hand, if you reduce your meals out down to one meal each week at your favorite restaurant, you may find it easier to stay on track.

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Non-discretionary expenses are typically harder to cut back than discretionary ones. Still, certain measures—buying your groceries in bulk and sticking to ingredients rather than prepared meals, or reducing trips in your vehicle to cut back on gas consumption—may help to reduce costs.

Create a personal budget worksheet

For most people, the simplest approach is to create a monthly budget worksheet, which you’ll use to plan and track your income and spending. If you find financial planning overwhelming, it may help to break each month down into weeks, particularly if you have bills coming due at different points over the course of each month.

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Create sections for income, expenses, and cash on hand

The income section of your worksheet lists any current revenue streams you have open.

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The expenses section lists all of your monthly expenses. You may want to break it into two sections: One for discretionary expenses, and one for non-discretionary expenses.

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The cash on hand section lists how much cash you currently have available to cover expenses. You’ll update this each month for any losses (spending to cover expenses) or gains (money saved) to your cash on hand.

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Make two copies of the worksheet

Fill the first copy of your worksheet with your goals for earning, spending, and saving. In other words, this worksheet will list what you expect to earn, spend, and save based on your plans.

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Leave the second copy of your worksheet empty, and update it over the course of the month.

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By comparing the two worksheets, you can track how your financial planning matches up with reality. This helps you avoid going over budget (expenses) and plan how to allocate any extra earnings (income).

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Adjust your budget as needed

At the end of each month, review your goals worksheet (what you expected to earn and spend) with your on-the-go worksheet (how much you actually earned and spent). Then make adjustments to next month’s goals as needed.

Map out your runway

In business finances—particularly when it comes to startups—”runway” refers to the amount of time you can continue operating before you need to start making a profit.

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To calculate your personal runway, take into account any income you expect to earn, cash you have on hand, and your expenses. Then calculate how much longer you can continue operating before you go into a deficit (e.g. start using credit cards to cover non-discretionary expenses like rent or groceries).

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Your runway extends to the point at which you’re no longer able to cover your living expenses. That may be several months in the future, or it may be several years. The important thing is that you set a goal to find a new job—or earn equivalent income by launching your own practice—before you reach the end of your runway.

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Yes, mapping out your runway puts more pressure on you, since you now know how much time you have left before your finances get critical—and you need to find a solution before you reach that point.

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But it also makes the future less uncertain, and reduces the likelihood of any unwelcome surprises along the way. And it gives you the tools to start planning the next phase in your career and take control of your future.

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Start working as a solo therapist ASAP

If you’ve always dreamed of operating as a self-employed therapist, leaving your job may put pressure on you to turn that dream into a reality as soon as possible.

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There are many steps to launching your own therapy practice. The good news is that, if you just stick to the bare essentials, you can quickly get up and running and treat clients remotely in a relatively short amount of time.

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Will you have the office you always dreamed of, or the beautiful website and branding, or social media accounts with thousands of followers? Probably not. But you’ll start earning an income ASAP—and you’ll be taking the first steps towards building your ideal practice.

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So here’s a step-by-step, seat-of-the-pants guide to starting work as a self-employed therapist as quickly as possible.

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Budgeting for your new practice

Plan to spend around $1,000 to $2,000 to launch a barebones practice. The cost will vary according to the state where you need to register your business and how much you end up paying for insurance. You’ll find a breakdown for each expense below.

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It may seem like a hefty expense up front, especially if you’re just left your job. But it covers all the non-optional costs necessary before you can start seeing clients and earn an income.

Register your business (if necessary)

The moment you start earning income as a self-employed individual, the IRS considers you a sole proprietor for tax purposes.

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But in many states, in order to practice as a self-employed therapist, you’re required to register as a limited liability company (LLC) or a professional limited liability company (PLLC). Consult your Secretary of State’s website to find out whether you’re required to register.

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The cost of registering depends on your state, and the cost varies widely—from $72 (Utah) to $800 or more (California). For a list of fees for each state, and more information on registering an LLC, check out our Complete Guide to LLCs and PLLCs for Therapists.

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The good news is that you can usually register online without much difficulty. Once you’re registered, you’ll be able to begin legally practicing as a self-employed therapist in your state.

Get insured

No matter where you practice, you need professional liability insurance in order to treat clients as a therapist. Even if local laws don’t require you to be insured, insurance protects you from being sued for malpractice.

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Plan to spend up to $800 for your first year of insurance. You can learn more from our article, Do Therapists Need Professional Liability Insurance?

Sign up for an EHR

In order to remain HIPAA compliant, you need systems in place to protect clients’ information. That includes everything from telehealth sessions and emails to billing details and invoices.

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The simplest way to ensure you’re HIPAA compliant is to sign up for an electronic health records (EHR) system. The most popular systems will cover almost every aspect of HIPAA compliance for your practice.

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Plan to pay $25 – $60 per month for an EHR. Popular choices include TherapyNotes, TheraNest, and SimplePractice.

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Your chosen EHR may not include confidential, HIPAA-compliant email. A run-of-the-mill, free Gmail account doesn’t cut the cake. But a Business Starter Google Workspace account costs about $6 per month and includes HIPAA-compliant email.

List yourself in directories

Creating a listing for yourself in a therapist directory doesn’t only help bring in local business. If you don’t have a website, it’s the place you send potential patients—including referrals—to learn more about you and the services you offer.

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Psychology Today is the most popular therapist directory. It starts at $29.95 per month. Other directories cater to therapists serving a particular niche—Therapy for Black Girls, for instance. And some, like TherapyDen, don’t charge to list your practice.

Set up rudimentary bookkeeping

Bookkeeping is the practice of tracking every dollar you earn and every dollar you spend. Even if, at first, you’re only seeing a few clients, it’s a good idea to set up a basic bookkeeping system. Most therapists just getting started create a spreadsheet with Excel or Google Sheets to track their finances.

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Setting up a bookkeeping spreadsheet now will save you headaches later. You’ll be able to track tax deductible expenses, and calculate how much income to withhold to pay taxes (more on that in a moment). Once your client list grows and bookkeeping becomes a real chore, you can hire a professional bookkeeper.

Open your doors to referrals

According to the Heard 2025 Financial State of Private Practice Report, word-of-mouth referrals are one of the most common ways therapists get new clients.

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Since you’re launching your practice as quickly and minimally as possible, you don’t have time yet to create a major, multi-channel marketing campaign. But by simply contacting friends and colleagues in private practice, and letting them know that you’re open for referrals, you can start bringing in new clients and growing your client list.

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For a deeper dive, see How to Get More Referrals for Your Therapy Practice.

Withhold money for taxes

Once you go into practice as a solo therapist, you’re responsible for paying your own income tax and self-employment taxes. In order to do that, you need to withhold a portion of all income you earn so you can pay your tax bill after the year ends.

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Start withholding money for taxes the moment you begin earning an income. Being hit with a tax bill you can’t afford can be a major hindrance when your practice is just starting out, and may lead to fines and penalties.

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It’s a good idea to set aside 25% to 30% of everything you earn. For a breakdown of the taxes you owe, and some tips on reducing your tax burden, check out Tax Planning Strategies for Therapists.

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Taking therapy clients with you when you leave your job

It’s natural to want to take your clients with you when you leave a larger practice. Not only does this set you up with a source of revenue once you’re operating on your own; once you’ve built a therapeutic relationship with a client, you may believe it’s in their best interests that you keep treating them personally.

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But before you start talking to clients, here’s what you need to do.

Review your agreement with your employer

Particularly if you were working for your employer as a 1099 contractor, your employment contract may include a non-compete clause barring you from taking clients with you if you launch your own practice.

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Some group practices even include language in their contracts barring employees from launching their own practices anywhere within a certain geographic radius. Thankfully, these kinds of stipulations are rare.

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Take time to review any contracts you’ve signed—either when you started working for your employer, or in exchange for receiving a severance package when you left—and make sure none of them explicitly prevent you from continuing to treat your clients after you leave.

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If you’re uncertain about the wording of these agreements, or if you need to clarify some points, discuss it with your employer—preferably after you’ve stopped working for them, or after you’ve notified them you’ll be leaving.

Think about the ethics of taking clients with you

There are professional ethical considerations to take into account if you’re considering taking clients with you when you leave your job. These particularly have to do with your relationship with clients, rather than your relationship with your employer.

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Since you stand to benefit financially from taking clients with you, it would be a breach of professional ethics to encourage or pressure your clients to keep seeing you after you leave your employer. Your clients should always feel empowered to make choices about their treatment that they believe to be right for them.

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Of course, you can let clients know you’re leaving to start your own practice, or potentially work at a different practice. But it’s important you don’t directly encourage them to follow you.

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With that in mind, feel free to tell your clients that you’re moving on. But leave it up to them to bring up ongoing treatment with you, and only provide the details they ask for.

Consider your relationship with your former employer

If a significant number of clients end up following you when you leave your job, it could negatively impact your employer. Be upfront and honest with your employer about how many clients they can expect to lose when you leave their practice, and make it clear exactly how you’re communicating to current clients about your move.

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Whatever your feelings toward your employer at the moment, it reflects poorly on you as a professional if you intentionally take steps—or appear to intentionally take steps—to harm their business. Working with them to make the transition as smooth as possible, and being upfront with your intentions, saves you from sowing the kind of enmity that can come back to bite you later in your career.

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Joyce Marter, LCPC has published a concise but thorough LinkedIn post on how to exit a group therapy practice ethically and with integrity. Check it out for some helpful dos and don’ts when it comes to leaving your job and taking clients with you.

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How to launch your own therapy practice after leaving your job

Leaving your job could be just the jumpstart you need to go into practice for yourself. While it’s possible to start seeing clients shortly after your employment ends (see above), laying the groundwork for a practice that will survive, grow, and continue attracting new clients takes a few extra steps.

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Below, you’ll find links to every one of our articles relevant to launching your own practice. Don’t feel as though you have to read every one. Instead, get started with one or two overview articles, and as questions come up, refer back to this list for help finding the answers.

First steps

Business formation

Liability

Insurance

Bookkeeping and accounting

Taxes

Admin

The Complete List of Policies and Paperwork for Your Therapy Practice

Marketing

Growing your practice

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Key takeaways:

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Immediately after leaving your job, find out whether you’re eligible for unemployment benefits—and register for them if you are.
Employers are not legally entitled to offer severance. But if you’re in a position to receive severance, carefully review any agreements before signing.
If you’ve never used a personal budget before, now is the time to start—it will help minimize gaps in your cash flow while you transition to a new job.
You can start seeing clients as a self-employed therapist as soon as you leave your job, but depending on your state, you may be required to register an LLC or PLLC.
While there’s nothing to stop current clients from continuing to see you for treatment once you leave your job, follow professional ethical guidelines when notifying them.
If you’re planning to bring clients with you when you leave your job, be upfront about the fact with your employer, and follow best practices for maintaining a cordial relationship with them.
Leaving your job may be just the jumpstart you need to go into practice for yourself. Don’t think of it as the end of a job, but as the beginning of an adventure.

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Debt can be a major stressor when you’re unemployed. For help managing it, check out How to Pay Off Debt: A Complete Guide for Therapists.

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This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult their own attorney, business advisor, or tax advisor with respect to matters referenced in this post.

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Bryce Warnes is a West Coast writer specializing in small business finances.‍

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