This article was last updated on May 9
With unemployment at record highs and a Coronavirus-COVID19 induced recession around the corner you may get into work one of these days and hear that your employer needs to cut costs and your position has been made redundant. Are you prepared for this scenario and its likely impacts on your financial security? In these weak economic times with lower company profits and unemployment rising, you need to be prepared for adverse circumstances such as losing your job. Whether you are in a dual income or single income household, you need to have contingency plans in place if one or more of your main sources of income goes away. Here are four key items to plan ahead for.
1. Get your financial house in order
Emergency Fund – have at least three to four months of living costs close at hand to whether the drop in your household income. If you don’t have that kind of cash available keep other accessible sources like your home-equity line of credit untapped. It’s a lifeline if you ever need it, and it costs nothing if you already have a mortgage. Pay-off any credit-card debt – normally the most expensive – if possible ahead of time while you have an income.
Here’s one tip that a number of others will think is crazy – get more credit cards while you have a job – but don’t use them! It is always much easier to get approved for credit cards when you have a job and income. The credit cards would then provide a last resort source of funds. Again I repeat, they are to be your last option, but they could give you some valuable breathing space in case of financial emergencies before you get the next job.
Start keeping a budget so you know what you are spending money on, and where you can realistically afford to cut back. To state the obvious, now is not the time to make non-essential big-ticket purchases or taking that overseas family holiday. If you are facing the real prospect of a pink slip (layoff), then you should start analyzing your budget to see what life would be like if you lose your income source. Will you be able to manage with the funds you have, and what mandatory or discretionary expenses you need adjust or eliminate to live on a lower income.
2. Update your Resume & Networks – Make sure you keep your resume and networks up-to date. In times like these, using your networks to find new jobs is key. 70% of jobs are not advertised so knowing the right contacts in the industry you are in or want to move to is critical. If you have not been keeping up with your networks, start now. Don’t wait until you lose your job to start networking. You can also used social media sites like Linkedin for maintaining and extending your professional networks.This should be an ongoing activity and if you know you are going to potentially lose your job then start the search for a new job well in advance. Not only will you be in a stronger negotiating position, you will give yourself some time to evaluate options. Remember the benefit of networking is based on the old adage – “It is not what you know, it is who you know”.
Some people have also used losing a job as an opportunity to start their own business or to change career tracks. This is may be great for some people, but remember to have your financial house (item 1) in order before you do this.
3. Family Plan & Support – Be prepared ahead of time. If you are in a job, discuss or think about how you would manage without one. If you have a family, make sure everyone is involved in these discussions because if the worst happens, then everyone will be impacted directly or indirectly. Family can be your best form of support and talking about these issues ahead of time will reduce the stress on relationships when/if times get tough.
4. Know your rights – If you are expecting a lay off or retrenchment, make sure you know what you should be entitled to. Know if and when you will have access to any unemployment benefits. In the US, most people’s medical benefits are tied to their jobs, so understand your coverage costs under the COBRA policies (it’s in those documents we get when we get hired, but never read). Review your employment contract for relevant termination clauses, notice periods and what payouts (like long service leave and company pensions) you could be entitled to.
Administratively, get direct phone numbers and names of people in your HR, Payroll and benefits department as you may need to contact them after you have left the company and getting to them via your company switchboard/operator can be very difficult.
I currently work in the financial sector and with the turmoil and mass layoffs across a number of companies, I have to be prepared. Even if you are in a relatively safe job, it makes sense to take some of the above steps because there could be other unforeseen circumstances that result in a job loss or big drop in income that you need to be able to manage