In an unpredictable business climate, you can't be certain of much except this: The future is always uncertain. Thanks to current business events and trends, such as corporate scandals, downsizing and offshoring, the threat of sudden unemployment is real for almost everyone.
Unlike being dismissed from a job based on poor performance, a layoff related to a company's or the economy's well being can seem sudden and unexpected.
But if you aren't sure when, or if, the ax will fall, how can you prepare? The best way to safeguard against uncertainty is to expect the unexpected and plan for the worst -- while still hoping for the best, of course.
Forewarned Is Forearmed
To determine how real the threat of a layoff is, start investigating the health of your company. Research its performance in comparison to competitors. Listen for talk of mergers, takeovers or possible relocation. Pay attention to calls for cost cutting from upper management. Watch the price of company stock if you work at a publicly traded company. Inquire about the size of this year's bonuses as compared to last year's (without actually asking anyone for an exact amount).
If what you learn makes you uncomfortable, take action. Update your resume immediately and post it on Yahoo! HotJobs. Next, meet with a human resources representative and learn what you are entitled to in case of a layoff. Ask about severance packages as well as unused sick and vacation time, bonuses, stock options and any retirement plans. Find out if you would be eligible for COBRA for your medical and/or dental insurance. Ask what your monthly premiums would be and how long the coverage would last.
Do not indicate that you are worried about the company's future. Simply state that you're working with a financial planner and need to assess your full financial picture.
Determine Your Financial Strength
A job loss -- even a sudden one -- will sting a lot less if you have your finances in order. This can prevent you from getting into debt or taking a less-than-ideal job. Begin by assessing your financial health now. If you can't afford to work with a financial planner, do your own planning with Yahoo! Finance.
If you are in debt, particularly credit card debt, make a plan to get out now. Poor credit can negatively impact a future job search and limit financial options, such as refinancing a home. Visit theFederal Trade Commission website for further information.
Next, create an austerity budget, one that will allow you to determine the minimum you need to cover basic expenses, such as rent or mortgage payments, utilities, food, transportation and health insurance. Call your state unemployment office and find out how much unemployment you would be entitled to if you were laid off at your current salary. Compare your budget to your anticipated unemployment benefits to determine how much savings you may need or how long you could go without full-time employment.
In Case of Emergency
Once you have an austerity budget and an idea of how much unemployment you would collect, create a new budget that will allow you to immediately begin saving money each month. Common wisdom dictates you should have an emergency fund worth up to six to eight months of living expenses. This fund should be above and beyond any retirement-savings plans you have.
Assess alternate revenue streams as well. Can you still earn money if you're between jobs? Absolutely! It just requires creative thinking. Consider becoming a vendor on eBay. Walk dogs in your neighborhood. Sell your crafts. Check into day trading.
If a sudden and indefinite job loss could impact your living situation, have a conversation with family and friends to create a plan to keep a roof over your head -- even if it is someone else's. Consider getting a roommate or becoming one, crashing on a relative's couch or asking Mom and Dad for assistance. Work out the details now so you won't have to have uncomfortable or desperate conversations later.
Worst-Case Scenario
Preparing for the worst softens the blow financially and emotionally. So if the ax does fall, don't sweat it: Simply spring into action.
If you receive a severance package -- and you should negotiate for one even if it is not offered -- spend it wisely. Use it to pay for living expenses, not luxury items. Immediately visit or call your local unemployment office to apply for benefits. Don't forget to sign up for COBRA as well.
Should you find yourself falling short financially, despite your planning, contact your creditors immediately. Tell them you've been laid off and are actively seeking new employment. You can often save your home or car simply by working with your lender to adjust your payments. Credit card companies may also offer hardship plans. Student loans may be placed in forbearance.
