Preparing Finances For A Potential Layoff
News on the state of the U.S. economy continues to be less than positive. With erratic fluctuations in the construction and mortgage industries, increased cost of food and living expenses along with employment and job opportunities being stagnant, many companies that were once booming are facing drastic measures to stay solvent that include letting thousands of loyal employees go or cut their hours. Almost no job is recession proof.
If you’re lucky, you will be given advanced warning of an impending layoff. But for many hardworking people, the layoff notice is not only unexpected but also frightening. For many of those who were surprised by this sudden move by their employer, there were signs along the way that weren’t recognized. Some clues to potential problems include a hiring freeze, reduction in expenses, few promotions, limited raises, management resignations and terminations, travel cutbacks and job cuts at competing businesses.
Whether you consider your job secure or see the writing on the wall of an impending layoff, it’s wise to be alert to signs of trouble where you work so that you can begin early preparations for a reduction of income or heaven forbid your job. If you feel that your job may be at risk, it’s important to start a contingency plan and steps to secure your financial future right away.
Work to Pay Off Debts – This is not the time to increase your monthly payments but to stop using credit. Remove the temptation by taking them out of your wallet and storing them in a safe place – out of sight, out of mind. Finance Guru Dave Ramsey suggest that to eliminate debt you begin paying off one debt at a time, putting as much money as you can towards one and the minimum on the rest. Once that debt is paid off, you focus on your next debt.
Increase Emergency Account – This is important for everyone, not just those whose jobs may be in jeopardy. Start saving when times are good and you’ll have a safety net for tough times. Make it a priority to set a year’s worth of living expenses aside in an insured bank or credit union. The goal is to be able to live for one year on this account without the need to supplement with a credit card. Never invest emergency savings in the stock market.
Minimize Expenses – Everyone has indulgences they can do without. This should go without saying, but many people fail to realize how small cuts in expenses can relieve some of their financial burden. Learn to prepare meals at home, cut your own lawn, and do your own home repairs; find other frugal ways to cut expenses. If you normally enjoy two incomes, consider the changes that will be necessary, if you’re ever limited to living off one.
Here are a few additional suggestions, if the unthinkable happens and your job is terminated.
Get Additional Training – It’s always a good idea to stay on top of the latest.
Use Job Benefits – Take advantage of healthcare insurance that may lapse by scheduling medical and dental appointments prior to your layoff. If you have a flexible spending account with your employer, use your allotment while laid off, if a situation arises that is covered to make the most of your investment dollars. Consider paying for COBRA extended coverage, if you can work it into your budget.
Prepare for a New Job – Update your resume throughout your work career so that it’s ready for any unforeseen job loss. Maintain your business associates and colleagues and social contacts. Collect letters of recommendation that help explain why termination wasn’t due to any negative job performance.
Expand your network – Many people find good jobs through people they know. Join free social networks and services like Linkedin. Get involved and connect with friends and associates; hand out business cards and ask for job referrals. Apply for unemployment benefits. Take advantage of online filing if you’re eligible for benefits and available in your state.
The best time to prepare for a storm is before it hits. A positive attitude may be the best way to view your world but don’t be blind to the possibility of trouble and prepare for the worst. Your effort will be rewarded with a plan in place and an emergency fund that will be an investment for the future, even if you never need to use it to supplement your income.