From time to time there are dire warning signs that you are likely laid off - a buyout from your company, a merger or a strategic change of course. Other times, the cuts come without warning. But although controling layoffs is not something you can do, being financially prepared for such an event certainly is.
"Companies are evolving, changing and failing, and employees, and even business owners, must be prepared for the unexpected," said Mike Silane, a chartered financial analyst at 21 West Wealth Management.
Save some extra money
Building up savings in a reserve fund is job number one.
The amount depends on your field of expertise and your seniority level, said Mike Zung, a financial planner at Java Wealth. For much-needed jobs with many openings or jobs at a lower level, it should be enough to have three months of expenses alone, he said.
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"If you are highly specialized and earn a high salary, you run a greater risk of being unemployed or long-term unemployed," Zung said. "Your emergency fund may have to cover expenses of six to nine months."
Make sure your reserve fund is separate from your bank account, said Cory Nichols, a financial coach at Yes Life Financial.
"Not only are you more likely to dive in if it's at the same bank, but you probably don't even keep up with inflation," he said. He recommended using a high-interest savings account that is not connected to your primary bank, but is accessible.
Check your expenses
To know how much savings you need, check your expenses and calculate how much you really need to get through a month.
"Just because you can afford a higher mortgage or auto payment right now doesn't mean you could if you were fired," said Joseph Brady, a financial planner at Rock Financial Planning, but you don't know unless you keep track of what's coming in and out.
In addition to paying credit card debt, he suggested going a bit to a full cash payment plan.
"Take out cash to pay for everything, so you don't get used to charging anything," Brady said. "Although this may seem difficult at first if you are not used to it, it helps you to understand your actual expenses."
This is also a good time to clear up the lifestyle extras that you do not use and do not need.
"If you think you can be fired, go through your budget and see what expenses you can save," said Scott Newhouse, a certified financial planner with Forthright Finances. "Do you need all those subscriptions? Do you have to eat out so much? Do you have to pay so much for the cable? If you can, you can now find some savings to help you lose jobs."
Refinance as long as you can
If you think your name is on a shortlist for work cuts, you might consider refinancing your mortgage. Restarting with a 30-year mortgage will lower your monthly payments, said Robert Falcon, a certified financial planner at Falcon Wealth Managers.
"Of course, it will break your heart to go back to a 30-year mortgage if you have seven years left on your current mortgage," he said. "But the chance to lower your burns is too good to pass up. And if you don't get fired, you can always make the same payments you made earlier to complete that mortgage in seven years."
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Falcon also recommended taking a home equity line of credit or HELOC while you are employed.
"That's nice to have in your back pocket," he said.
But most HELOCs have a variable interest rate that starts to rise, so if you hold it too long, it might not be the best source of cash. "You need a more permanent solution - it's just a bridge to help with cash flow."
Use your benefits
With changes ahead, it's now time to use your staff benefits or lose them in many cases.
While a health expense account (HSA) can travel with you from job to job, a flexible expense account (FSA) is owned by the employer. If you do not incur any costs and use your FSA, the money will remain with the company that you simply let go.
Schedule the colonoscopy, take the Lasik surgery or get some extra supplies at the d–gstore, Falcon said.
Also check your 401(k).
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"If you're right with cash, you can accelerate your 401K contributions to reach the start of the year at the maximum," he said.
This is also the time to repay all the money you borrowed as a loan from your 401K, Falcon said.
You can take skills with you when you go, so make use of educational opportunities with your current job.
"Many employers have budgets that employees can use to acquire new skills, licenses or even college education," says Jonathan Bird, a certified financial planner and head of Farnam Financial.
Make sure you are properly insured
Having a life insurance policy that is separate from that offered by your employer, as well as your own disability insurance, can protect you against a sudden loss of income or health problems.
In general, the collective life insurance policy of an employer ends when you leave your job and you must apply for new coverage. This is usually not a problem, but some health problems can make it difficult for some people to find affordable policies.
To determine how much life insurance you need, Nichols uses this rule of thumb: take your monthly take-home wage times two and add two zeros. If you have $ 4,000 a month in income, you need $ 800,000 in life insurance.
"It's one less thing to worry about if you ever lose your job," Nichols said.