There’s nothing fun about a layoff, particularly these days when the amount of time it takes to find the next job is still way above historical averages. But if it has to happen, you’re best off if – like Carolyn and her husband – you’re in a financial place where you can weather it. As she noted: “We travel. We eat out. We don’t skimp on anything except we don’t own expensive cars. We don’t buy expensive clothes. Everything is just within our means.” That’s what I call doing it just right. Checking the following off your-to-do lists will also enable you to handle a lay-off if one should happen to come along. (On the flip side, if you’re the one who decides you simply can’t stand one more day at your current job, they come in handy as well.)
- Fund a substantial emergency cushion. Financial experts vary when it comes to recommendations for how much is enough in your cushion. I like to see at least three months of living expenses if you’re a two-income family and at least six months if you’re living on a single income. Why the difference? Because if you have two incomes, chances are you won’t lose both simultaneously. And note: A month’s worth of living expenses is not equal to the amount you spend every month. It’s the amount you’d have to spend in a month if you weren’t spending on the things you want but don’t really need.
- Put it somewhere you can access it. I know interest rates on savings and money market accounts are low by historical averages. When it comes to your emergency fund, it doesn’t matter. The money still needs to be somewhere you can get at it easily in a pinch. To me, that means in my local bank, in a savings or money market account. Not in a CD. And not in a mutual fund. I’ll earn my return on my investments instead.
- Consider a back-pocket emergency cushion, too. Should your layoff drag on, you’ll want to know that you have other sources of potential cash to tap. My suggestion? A home equity line of credit. Now, as far too many people learned during the financial crisis, you don’t want to use your home as an ATM unless it’s absolutely necessary. And you do not want to pull more equity out of your home than you absolutely need. But this is one of those things you have to secure while employed. So if it sounds good to you, do it sooner not later, just in case.
- Always be networking. When’s the best time to get a new job or start a new business? When you’re currently employed. Yes, it means working a little harder, putting in considerable extra hours. But the pressure of doing these things while you have a paycheck rolling in is nowhere near the pressure of doing them when your severance is running out. Take the time to maintain your connections, keep your resume and contacts up to date, and preserve your memberships in important organizations. They’ve never been more valuable.