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There's an old saying: assume the worst, hope for
the best and be prepared for whatever happens. Amid mounting evidence that
the U.S.
is headed into recession, that is advice worth taking, especially in regards
to earning a living. In "With Recession Looming, Be Prepared for
a Layoff" MSNBC's Laura T. Coffey
details a 10-step plan for coping with what is likely to be a fast-growing
threat.
You may feel secure now, but you never know when the
pink slip is coming
The dreaded “R” word – recession
– has been dominating business headlines for months now. More and more
economists are predicting bleak economic conditions and weak job growth in
the coming months.
On Friday, it was reported that employers slashed
63,000 jobs in February, the most in five years. Do you need any more signs
that we are teetering on the verge of recession?
Even if you feel secure in your job at this moment
in time, here’s a sobering thought: Because
of forces beyond your control, you could be hit with an unexpected layoff at
almost any moment.
For this reason, it’s always a good idea to
plan ahead for potential financial emergencies before they strike. The
following tips can help.
1. Establish an emergency fund. Set aside
enough money to cover your basic living expenses for three to six months. This
should give you the ability to pay your rent or mortgage, buy food and repay
debts. Consider socking this money away in an online-only, high-yield money
market account or a short-term certificate of deposit. For more details about
how to choose such an account and earn more interest on your dough, read this
past “10 Tips” column on the
subject.
2. Live within your means. Try hard not to
spend excessively on items and services you don’t truly need. This will
make it even easier to build up that emergency fund once and for all. For
additional ideas about how to establish an emergency fund, this past
“10 Tips” column about how many middle-class families are being
squeezed financially could be of help to you.
3. Use credit cards with great caution. Especially if you have a
hunch that a layoff might be looming, be extra careful with credit. A credit
card can keep you in denial about your true financial situation. Accumulating
debt will only add to your stress – and you don’t need any more
stress, whether you lose your job or not.
4. Talk about money with your partner. Even when
things are going well, it’s common for one partner to be completely
unaware that the other partner has different financial priorities and goals. A
layoff – or the specter of a layoff – can put the spotlight on
such differences and lead to terrible fights. To avoid this, talk honestly
and set goals together about how to cope in the coming weeks and months.
5. Tackle high-interest debt. Before a layoff
ever strikes, make sure you’re not letting debt hang around for months
on a high-interest credit card. Transfer that debt to cards with lower
interest rates, or consider paying it off with money from a small closed-end
loan from your bank or credit union. Then over the next three months or so,
you can concentrate on paying back that lower-interest loan.
6. Network, network, network. Always make a
point of getting to know as many people as you can in your line of work. By
having plenty of friends and contacts in your industry, you’ll stand a
better chance of finding work quickly if you lose your job.
7. Line up a line of credit while you’re
still employed. If you own a home and you can see that a job loss
might be coming, consider opening a home-equity line of credit and keeping it
open. Don’t tap into the line of credit at all; just know that
it’s there in case a real emergency hits. Some lenders – but not
all – charge an annual maintenance fee in the $75 to $100 range for
keeping a line of credit open, but that can be worth it for the peace-of-mind
factor.
8. Pursue disability coverage before you lose
your job. Personal disability coverage is an important thing
to have – and it’s also important to secure coverage based on
your current level of income. Apply for such coverage while your income is at
its highest. This would involve supplementing the group coverage you may have
through your job with individual coverage. If you buy additional coverage on
your own, you can take it with you when you change jobs, and it will be
tax-free. Comprehensive disability coverage can be very costly, but you can
find accident-only disability policies for as little as $25 a month. At least
you’d have that much coverage during a bout of unemployment; once you
get back on your feet, you could make sure you have disability insurance that
covers both accidents and illnesses. For more details about individual
disability coverage, visit this About Disability Insurance site and this
Insurance Information Institute site.
9. Pursue higher education while you can. Do you work for
a large company that offers a “Corporate U,” or for an employer
that helps cover education costs at schools in your area? Tap into that
resource so you can improve your skills and bolster your resume. Hundreds of
corporate university classes have been accredited, meaning you could get
college credit for them if you ever enroll in a degree program.
10. Investigate your health insurance policy. Be clear on
what your health plan covers, and figure out how much it would cost to extend
your employer’s group insurance coverage through the federal program
COBRA. Be aware that you would have to pay both the employer and employee
shares of the premiums – ouch – but at least you’d get to
keep the same coverage.
By :
Michael J. Panzner
Editor, Financialarmageddon.com
Michael
J. Panzner is a
25-year veteran of the global stock, bond, and currency markets and the author of Financial Armageddon: Protecting Your Future from Four Impending
Catastrophes, published by Kaplan
Publishing.
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