-- intro: A few years ago, a friend of mine was working for a company that was experiencing financial difficulties. He knew that if things didn’t turn around soon the company would either go bankrupt or they would begin laying people off. He had an expensive monthly car payment and some credit card debt that would be difficult to manage if he were unemployed. He started applying for jobs, and sold his car to pay off the remainder of his car loan. He also began paying off his credit card debt more aggressively. When he got laid off five months later, he was not only in a much better place financially but he had a bunch of interviews already lined up.
For most people, getting fired or laid off isn’t something that takes them by complete surprise. Your company might be facing financial difficulties or they might already have laid off some of your colleagues. You might have been reprimanded by your boss or gotten a bad performance review. Often, you have an idea that your job isn’t as secure as it once was.
If you suspect you might be about to lose your job, you should do everything you can to prepare financially. Here are some ways to be proactive to ensure that you land on your feet if you lose your job.
quicklist:title: Don’t Listen to Your Bosstext: If your boss is telling you that there’s nothing to worry about but your alarm bells are going off, trust your gut! Most companies tell employees that they aren’t planning any more layoffs right after they lay people off. If the company is experiencing financial difficulties the last thing that they need is for their best employees to leave the company since turnover is extremely expensive. They will therefore often say things to reassure employees and won’t share the true depth of the financial issues with their staff.
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quicklist:title: Look for Another Jobtext: Some people are hesitant to start looking for another job because they love their current job or think they’ll have a hard time finding another job that they like as much or that pays them as much money. By not looking and not applying, they potentially miss out on great opportunities that are better than their current positions. The problem with waiting until you’re unemployed to start looking for work is that it’s easier to get a job when you already have a job. While you might not want to switch jobs, you will certainly not regret it when you see your former colleagues looking for work should something happen to the company. Just make sure not to tell anyone you work with that you’re looking for other opportunities since that could jeopardize your current job.
If your company is financially stable but you have a problem with your boss, you might consider applying for another position within your organization. If you are considered a good worker and a valuable asset, they will likely do what they can to help find you a new position in a different department.
quicklist:title: Live on Less and Save the Resttext: As you prepare for potentially losing your job, practice living on less money every month. Make any necessary cuts to your budget and forecast the amount of money you will have based on any unemployment insurance you expect to receive, any payouts your company will give you, and anything you have in your personal savings. Plan to be unemployed for 6 to 8 months and set aside any money that you save while you live on less for your emergency fund. While you may find a new job sooner, it’s better to budget for the worst-case scenario rather than be too optimistic and run out of money. Do your best to plan to weather this period without resorting to using your credit cards.
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quicklist:title: Deal With Your Debttext: If you think you might lose your job and you have debt, you need to come up with a plan to deal with it. You might also consider opening a new credit card that offers 0 percent interest for a year and transferring your balances from other cards. You can save a significant amount during this period by not paying interest. (You can see how long it would take you to pay off your credit cards using this calculator.)
If you have student loan debt, you might want to immediately choose and switch to a different payment plan that will allow you to pay less monthly and redirect the money saved towards your emergency fund. While you will pay more interest over the life of your loan with these plans, you can always switch back to another plan when you have a more stable source of income. Should you lose your job, you should consider applying for student loan deferment, which will give you a payment break (although keep in mind that interest won’t stop accruing).
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If you have a car loan that would add significantly to your monthly obligations while unemployed, you might consider selling your car and paying down as much as you can.
If you have any other loans that you will be obligated to pay while unemployed, prepare to have enough money to pay them. The last thing you want is to have your period of unemployment wreck your credit or put your home or other assets at risk.
quicklist:title: Start a Side Hustletext: In anticipation for potentially being unemployed, start working on a side hustle that will make some extra money to set aside that will help when you’re unemployed. A side hustle is really just any way that you can make money on the side. You could cut your neighbours’ lawn, tutor children or share your skills by consulting. There are also a number of great online side hustle ideas you could consider. Every little bit helps, so do what you can to make extra money to prepare for what might be a difficult time.
Hopefully, you don’t have anything to worry about and your job is safe, but by taking these steps you’ll have greater peace of mind and you’ll ensure that you’re ready for whatever comes your way.
Any opinions expressed in this column are solely those of the author.