Apparently, it's not enough to be able to write a resume well and
locate another job. How you deploy your other assets, such as cash,
are even more important than previously thought. There's a lot of
unemployment going around these days. The Job Fairies haven't been
immune. Sure, we negotiate good deals and get jobs quickly, but when
there aren't any jobs to be had, we have to wait it out with
everyone else. The Nightshade Fairy has worked for three different
dot-coms. They've all gone out of business through no fault of her
own. Shocking Pink and Green have each been laid off within the past
year. How well you've prepared for circumstances like these is what
separates the Fairies from the miserable.
You may not think you are in any danger of being laid off or your
company going out of business. That's good, but no excuse for not
preparing. We've included a cash and burn rate spreadsheet so you
can see what your spending and saving should be over a year's time.
You input your monthly expenses (using negative numbers, which will
show up in red) and your expected cash coming in (these should
appear in black, using regular numbers). You then copy these numbers
out over a year's time, and see what kind of money you will have
left over, if any. If so, that's good. Restrict your spending while
there's time, and save your money. If not, you have a problem. You
may want to drop the cable TV, cut off spending on all credit cards,
or sell a car. Refinance your house before you think you'll need to.
You may not be able to consolidate debt or alter the terms of your
mortgage in any way if you are not employed.
Take Advantage of Opportunities
Not everyone works at a place that hands out annual bonuses, but
Green and Shocking Pink used to. Whenever Shocking would get bonus
money, it was debt reduction time. She never spent it on anything
fun. When she had a car loan, they would suddenly get a huge extra
payment in the amount of the bonus. One year, she paid off almost
all her credit cards in one swoop with the bonus money. Likewise
with the tax refund money. When her employer laid her off, she used
the severance to pay off the remainder of her car loan and any
residual credit card amounts, which weren't much by that time. (When
she felt unemployment approaching, like when the layoffs first
started at her old company, she took that opportunity to cut back on
spending then, as if she were already not working.) She put the rest
into easily accessible savings. She's had some extensive periods of
unemployment, punctuated with occasional contract work, but she
isn't worried. She'll be making her house payments OK for a while.
Likewise with Nightshade when she was most recently laid off. She
cut out the restaurant lunches and dinners, among other luxuries.
All of her cars were paid off, so all she had to pay for was gas,
insurance, and routine maintenance. She was unemployed for over six
months, but she still has a decent amount in savings left.
Get Rid of the Highest Interest Rate Debt First
With minimal debt load, you can remain unemployed a lot longer
without the danger of losing your place to live. Try it for yourself
using the spreadsheet. Take the total amount you owe on each credit
card and divide it by 12. Enter that amount under each month. See
how much credit card payments could be eating up? Because whether
you pay it back sooner or later, you will have to pay it all back
eventually, with interest, so get in the habit of paying your cards
off each month or not using them at all. You will never have an
investment that pays you as much or more than you will be paying in
interest to credit card companies. Now remove all those payments
(temporarily). Your money could have lasted a lot longer had you not
used your plastic so much. Do the same with your car payment to see
how dramatic the difference is over a year's time. When you're
employed, you want to get rid of as much debt as you can. Send in
extra on your mortgage to be applied to the principal. Pay off your
credit cards first and your non-deductible loans second (i.e. cars).
When you're not employed, now is the time to defer all payments as
long as possible. Put the cable TV on hold. No housecleaning
service. No driving through the fast food places. Make the minimum
payments on your credit cards. Call your mortgage company, before
there is a problem, and inquire as to whether or not they can defer
any payments (some lenders just tack them onto the end of your loan)
- but beware. They can become a balloon payment, which means all the
money you didn't pay is all due at once in one lump sum at the end
of your mortgage.
Pay Attention to Economic Indicators
You should be reading the business section of your newspaper
every day. When you read articles about businesses in places like cnet.com or newyorktimes.com,
use these to gauge which way the market seems to be heading. Are
there many IPOs (initial public offerings)? This might be a sign of
health, or a sign that the market is overheated. Is the Federal
Reserve cutting interest rates, or raising them? How about interest
rates on mortgages? Are they rising or falling? What is the current
unemployment rate? Is it rising or falling? Is the national level of
unemployment different significantly from your local level of
unemployment? Which specific market segments are doing well or not?
If pure IT's slow, maybe IT within health care is not. IT within
manufacturing may be recovering while IT within telecom is still
shaky. Only if you watch the financial news, read the business
sections, and keep an eye on market conditions will you know what
kind of worst-case scenario you have to plan for.