January 26, 2009

Bloody Monday: How to Shore Up Your Finances In Anticipation of a Job Loss

The news hasn’t been good for weeks, but today America’s job market reached an all-time low. CNN reported this afternoon that 71,400 jobs were lost today. That’s the single highest job loss day since 1945. The companies affected include:

– Catepillar, which is cutting 20,000 jobs
– Drug-maker Pfizer, which is reducing its workforce by 10% — 8,100 jobs
– Sprint Nextel, which is eliminating 8,000 jobs
– Home Depot, which is closing its Expo Center and cutting 7,000 associates
– Texas Instruments, which is slashing 3,400 employees
– Financial group ING, which is reducing its workforce by 7,000 workers
– Farm equipment maker, Deere&Co, which is cutting 700 jobs in Iowa and Brazil

These losses are on top of the already record-high job cuts this month. Since the start of the new year — less than four weeks ago — 200,000 Americans have lost their jobs. Which means that even those readers that currently have a job are no doubt feeling rising anxiety about the security of their positions.

Many experts are now arguing that conventional wisdom about recession-proof jobs no longer applies. Even tenured positions at state universities, for example, are under threat from “exigency” stipulations that allow for job cuts in the event of a major budget crisis.

So… on that optimistic note… what should an employed person do to shore up their position in the event of a lay-off? Here are five suggestions that will help you reinforce your financial and professional foundation:

1.    Cut spending and squirrel away an emergency fund.

Personal finance experts have always recommended building up an emergency fund. Today, even habitual spenders are jumping on the saving-for-a-rainy-day bandwagon. Your goal should be to sock away three to six months worth of expenses in liquid assets. Don’t worry about earning the best interest rate; rather, make sure that you will be able to get access to your money in a day or two at the most. In the event of a job loss, you will qualify for unemployment — but that won’t cover the full amount of your current salary. And it doesn’t kick in immediately. Often, the unemployed have to wait four to eight weeks to get their first check (payment is retroactive).

If you don’t have any funds to spare, take a hard look at your budget. Focus on items like eating out, entertainment and luxury items at the grocery store. While going without these comfort items may be painful now, your reward will be a little cash cushion if the worst happens.

2.    Look into refinancing your home.

Lay-offs aren’t the only thing at an all-time low. So are interest rates. If you are a homeowner and plan to stay in your home for at least three more years, there has never been a better time to refinance. (Before you jump into refinance discussions with your bank, however, be sure that you still have equity in your home.) Even without extending the life of your loan, you can still lower your monthly payments — in some cases significantly — with a refinance. Just remember that refinancing alone is not going to save your financial future in the event of a layoff. It is, however, one step among many steps that you can take to shore up your position.

3.    Put your best foot forward.

This is NOT the time to come in late or to leave early. Make sure that you are putting your best foot forward every single day. Prove to your employer that you are a strong contributor. Take on more responsibility, not less, and work toward complexity of your job tasks. All that said, even the best employees may not be safe from 10 percent across-the-board cuts.

4.    Freshen up your resume.

Take the upcoming weekend to work on your resume. Update it with your current projects and other important responsibilities. Review each entry and make sure you are saying things as succinctly — and with as much impact — as possible. Ask a trusted friend to take a look at your resume and make sure that it is error-free.

5.    Network, network, network.

It’s the standard advice for the unemployed, since anywhere from 50-80 percent of all job openings are never advertised. Networking is also the best advice for the employed, since it’s the easiest way to stay in the game. You don’t need to launch an all-out job search (unless, of course, you’ve already been handed your notice). You do need to put out some feelers and make sure that you are not burying your head in the sand. Reconnect with old colleagues, professors, and professional associates. Keep your ear to the ground, so you are the first one to find out about the company that is hiring new workers. Options make you more secure. They remind you that you are a valuable employee and that you will weather even Bloody Mondays like today.

So how are you feeling in the aftermath of today’s news? What steps are you taking to shore up your financial and professional future? Please share your insights in our comments section!

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