Don’t Panic!

Over the last 14 months I’ve watched my retirement savings drop significantly, nearly 48%.  That is a hard pill to swallow.

The current economic environment looks bleak.  January saw the loss of 598,000 jobs.  Unemployment currently stands at 7.6%, the highest it has been in nearly 20 years.  Everyday we read news reports about the new “Great Depression”.

While I nearly lost my job during the recent layoffs at the company I work for, I have a different outlook on the current economy.  Maybe not entirely different, certainly I don’t think things are rosy and great.  They aren’t.  People who I’ve worked with for the last few years will be laid off after Friday.  They will become a labor statistic.  Rumors continue to swirl around about another wave of layoffs at my company in the not so distant future.

In the face of all the negativity being slammed in our faces everyday, how is it possible that I have a different outlook?  I have to be honest, it isn’t very easy.  Watching 150 people lose their positions at a job they thought they could depend on is hard, even for the people who were fortunate to keep theirs.  It is important, though, that we keep our spirits and continue to be positive.

For those who lost their jobs, you have my condolences.  I feel for you.  You gave your time and energy for a job you thought you could depend on.  Remember, every door that closes, another opens.  It is up to you to find that open door.  You are the only person who you can rely on so you should try to hit the ground running.  It won’t be easy in the current economy to find new jobs, however, “persistence assumes greater importance than the energy of the moment.”  Keep your chin up.

For those of us who still have a job, here are some tips for preparing for a layoff:

Boost Your Emergency Fund- You DO have an emergency fund, don’t you?  Maybe you call it a rainy day fund.  Whatever name you give it, you better have one.  If you don’t, you are setting yourself up for difficult times.  Something will eventually happen that you need some extra money.  Don’t be caught offguard and have to resort to using credit cards to make your way through.

Three to six months worth of living expenses is the most common number tossed around by the experts.  In the current economic situation, I would feel a little better having more than that.  My goal of $5,000 by the end of the year would allow me nearly 10 months of very basic living expenses.  Which leads me to my next point.

Cut Your Expenses- Is there a certain something in your life that sucks away your money like it is going out of style?  An extra car, a boat or motorcyle?  If it isn’t something you need, it may be wise for you to do your best to get rid of it.  You wouldn’t want to get stuck with a payment on something you don’t need and can’t afford without having a job.  Eliminating cable and internet can save a lot of money as well.  The library offers free internet to anyone who visits, and TV…well, you can live without it!

Eliminate Your Debt- Do you have a credit card…or eight?  Start paying them off.  They are a drain on your finances.  The interest you pay is money lost.  Look at last month’s statement.  How much did you pay in interest charges and other fees?  Wouldn’t you rather be putting that money elsewhere?  I’m sure you would.  Start paying down your debt.  That means more than the minimum. 

There are 2 ways of paying down your debt.  The first is to figure out which account has the highest interest rate, and pay that off first, then work your way to the next highest.  Mathematically, this is the better choice.  The second way is to list your balances from smallest to highest and pay the smallest first, working towards the largest.  The method provides a psychological boost because you see results fast.  Personally, I am a fan of the second method.  Seeing results and having less bills in the mail every month help reduce the amount of stress in a person’s life.

Whichever method you prefer, just do it!  Get that debt paid off!

Keep Investing- I know that for some this will probably seem like stupid advice, but think of it this way.  If your favorite store was having a 50% off sale, would you say “No, I think I’ll wait until prices start going back up before I buy anything.”  I didn’t think so.  Yes, there is a possibility that the market sinks even further, but trying to time the market is a fool’s game.  Figure out what you can realistically afford to invest, at a minimum the amount which your company will provide a match to, and stick to that amount.

Change Your Life- Preparing for a layoff requires all of the tips mentioned above, but one thing which is often ignored is to change your life.  Quit smoking, quit drinking, quit gambling.  Stop letting money slip through your fingers.  Find ways to entertain yourself on the cheap.  Going for walks is free, and it is good for your body and soul.  You don’t always need to spend money in order to have fun.  Take on a frugal state of mind.  It is actually a nice way to live.  Not having the worry and fear of “what if” always hanging over your head is a great state of mind to be in.

For those of you who have been impacted by layoffs, down-sizing, right-sizing, globalization…keep your chin up.  Find that open door.  Now is a great opportunity for you to pursue your dreams and ambitions that you ignored while you were “secure” in your real job.  Get out there and do something!  The door hasn’t slammed in your face, it has been closed on your past, now find your future!