How To Prepare For And Survive A Layoff
As of last month, the U.S. unemployment rate had decreased to 5.8 percent, the lowest it’s been in years, according to the Bureau of Labor Statistics. That’s good news, but don’t get complacent—nothing is secure when it comes to the economy. Get your finances in order while times are good, so you won’t panic if you’re handed a pink slip down the road. These tips will help you prepare for and survive a layoff in the unfortunate event that it occurs.
How to prepare for a layoff
1. Boost your cushion: Finance expert Dave Ramsey suggests having a $1,000 emergency fund. Start with any extra funds you may have at your disposal. And going forward, any windfalls or unexpected income goes directly to this fund. Also, slash variable expenses to free up more cash in your budget, and start paying yourself first. A set percentage of your income each pay period will suffice.
2. Pay down debts: The last thing you need is interest on credit cards spiraling out of control, a wrecked FICO score and creditors breathing down your neck. Think of ways you can raise the cash to help pay down debt. If you receive regular payments from a structured settlement or annuity, you may be able to sell your future payments for a lump sum of cash now.
3. Understand unemployment benefits: If you’re eligible for a severance package or unemployment benefits, retrieve the estimated amounts and formulate a plan to make the funds stretch.
4. Start considering freelance work: Do you have a hobby or skill in your arsenal that can generate a little (or a lot of) cash flow? Now’s the time to put your creative juices to work to rake in cash that can be contributed to your rainy day fund and replace lost income once your employer cuts the cord.
How to survive a layoff
1. Less is more: You should’ve gotten into the habit of reducing variable expenses by now. But if the layoff came as a surprise, the frequent dining out, visits to the spa and fancy phone plans just to name a few, must come to a halt. Simply put, if it’s not a need, it has to wait.
2. Closely monitor your spending: Before you commit to any budget, determine where your money actually goes each month. Doing so will help you obtain a realistic idea of which areas you excel in and others that desperately need improvement. In essence, you won’t be setting yourself up for failure.
3. Incorporate a realistic spending plan: It should at least cover bare necessities and account for benefits, cuts to expenses and improved spending patterns.
4. Contact creditors: If you foresee monthly obligations or due dates becoming a problem, don’t wait until the last minute to reach out to creditors. Immediately notify them of your situation and inquire about payment arrangement options that may be available to you.
5. Find a part-time job: Until you land your next career position, any income is better than none, especially if you don’t have a side hustle.
Finally…
Soak up all the knowledge you can about financial literacy through books, live seminars and online resources. Also, check with your financial institution to see if they offer workshops or one-on-one assistance. And don’t forget to continually invest in yourself through free continuing education until you secure the next position.