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Always Be Prepared: 5 Tips for Unexpected Job Loss

This article was written by in Best Of, Career and Work. 11 comments.


Whether you’re Joe Torre or Joe Cubicle, your at-will (more aptly, fire-at-will) contract may come to an end unexpectedly. If you’re smart, you may have seen the writing on the wall and given yourself time to prepare. Life isn’t always that obvious, so you should be thinking ahead and protecting yourself. Here are some tips that you can start putting into effect now, particularly if you are not the sole controller of your employment destiny.

Keep three to six months in accessible funds. The term “emergency fund” is outdated. Keeping a large portion of your emergency money in cash-like vehicles like high-yield money market accounts was a decent plan when you were able to get interest rates above and beyond 5%. Nowadays, savings accounts are not the best options for investing, but you still need to consider the possibility of not finding a job — at least, not at your desired salary — for a long time.

The money you use in an emergency — when you have no income coming in — can be a mix of the following:

  • Cold hard cash (a few days’ expenses). Only keep enough cash on hand for emergencies to hold you over until you can get more out from the bank.
  • Highly liquid savings or money market account (expenses for one week to a few months). If you can use your ATM card to get this cash, then you shouldn’t have any problems. As you can see from the the latest savings account rates, you’re not earning much on this money, so keep the balance low. With the Fed poised to lower the target federal funds rate this week, you can be sure banks will drop their interest rates even further.
  • Roth IRA (the current year’s contribution). You can liquidate and withdraw any amount you’ve invested in your Roth IRA without any taxes or penalties. If you do so, you will give up any anticipated earnings (or losses) on that money. You can refund your Roth IRA once you are no longer in an emergency up to that particular year’s maximum contribution as long as it is before April 15 of the following year.
  • Credit. If you have good credit, and if you normally manage credit well, you can get by with using a credit card to pay for some expenses. This can be dangerous and is not advisable for most. If credit is your main form of emergency fund, an unexpected hospital bill during an unexpected unemployment stint could present expenses that will cost you a fortune for years thanks to interest charges.

Mix and match the above to create an emergency plan — more than just an emergency fund, keeping in mind what works best for you. If some of the other preparations are in good standing, you won’t have to use much of your emergency money if any.

Donald Trump

Keep your resume and portfolio current. While your resume should be tailored to any position for which you apply, you should have a basic resume off of which you build your specialized documents. Review your basic resume and update it with your current responsibilities. Any time you work on a new, significant project, complete a task that is worthwhile for the company, assume new responsibilities, or receive a promotion, update your basic resume. Have it ready to go.

In the arts or in teaching, a current portfolio may often be the key to the next job. My girlfriend keeps a folder with some of the more impressive lesson plans and projects, as well as students’ work. While I was looking for a teaching job, I kept a portfolio that included music arrangements and videos of my instruction and ensemble performances. Artists certainly need to keep copies of recent work.

Rather than scrambling at the last minute to gather all these materials, simply keep updating your folders as you progress. I’m forgetful, so if you’re like me, schedule reviews on your calendar to remind you to take a few minutes to make the additions.

Always be networking. This doesn’t mean just going out after work with your boss whenever invited. Make friends in other departments and see as many people as possible related to your career goals. Always carry your business card. If your company doesn’t provide you with your own, make them yourself. If you create your own, keep yourself open to different avenues by not including any specific job title on your card. Include your name, basic contact information, and if you feel someone needs a reminder of who you are, jot a note on the card before you hand it to someone.

I’m not going to get into the details of networking as the topic deserves its own article, book, or series of books. I’ve never been great at networking; Myers-Briggs classifies me as split between an I (introvert) or an E (extrovert) — I’m an introvert among strangers and an extrovert among friends. Pure extroverts make the best networkers.

Get recommendations without asking. Part of my previous job at my current company was working with clients while planning official company events. I was not in the event planning department, but I found myself doing this work outside of my job description anyway. I’ve received thank you notes from other company’s CEOs as well as from senior executives from within my company. I’ve filed these away into a folder for any future needs. Personal notes from famous names and organization may help me someday.

Any recommendations you receive from your employers should go in this file as well.

Study your industry. There are two parts to this. First, you must make sure your knowledge is always current, especially if you are in a field like technology, where frequent advancements in the industry may change the way you operate. Take classes on the latest issues, even if they are not paid for or supported by your employer. If your field is more stagnant than software for example, then broaden your knowledge by learning about related topics.

Second, always know what the market is like in your industry. Are your target companies in hiring mode, offering fresh graduates bonuses or high salaries to attract new, young, malleable talent, or are job openings at an all-time low? Is some other city becoming the worldwide hub in your industry? These are the things you can learn by talking to people involved in hiring, reading industry magazines, newsletters, and even internet forums, and looking at job postings frequently.

Here’s a summary of the above:

  • Keep three to six months in accessible funds.
  • Keep your resume and portfolio current.
  • Always be networking.
  • Get recommendations without asking.
  • Study your industry.

Following these suggestions, you will likely be able to better handle an unexpected job loss psychologically and financially. If you’re always prepared, you should be able to find a new position relatively quickly. The quicker you are, the less you have to dip into your savings to pay expenses.

I don’t have all the answers. Almost definitely there are other great suggestions for preparedness just waiting to be shared. Please feel free to leave some comments if you have other ideas or if you disagree with my thoughts.

Updated February 5, 2014 and originally published October 29, 2007. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

{ 11 comments… read them below or add one }

avatar Brian

Great list! I think that even though job loss can frequently be unexpected, “unexpected” shouldn’t necessarily mean “unprepared”.
I would also add that you should sign up for unemployment immediately. While the check probably won’t be anywhere close to what your salary was, that extra money will definitely be appreciated. (Also, since your employer foots part of the unemployment bill, you can get some emotional satisfaction as well ;-)

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avatar razmaspaz

“You can liquidate and withdraw any amount you’ve invested in your Roth IRA for the current tax year without any taxes or penalties.”

I wasn’t aware of that. That’s really great to know. I don’t contribute to my IRA at the beginning of the year because I’m still trying to build my emergency fund. This may change that. Where can I verify this information?

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avatar Luke Landes ♦127,535 (Platinum)

Raz: You can verify it in a number of places. Your own brokerage/Roth IRA custodian would be the first stop, but here’s a link. Towards the bottom of the page:

What if I Need Access to My Money Now?
A helpful feature of the Roth IRA is that, for non-qualified distributions, original contribution amounts are returned first. Contributions (as opposed to earnings) are not subject to taxation or the 10 percent IRS premature-distribution penalty when distributed. In other words, you can always get back your principal tax free and IRS penalty free for any reason.

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avatar Calvin Trager

One more tip, be mentally prepared. I’ve found that repeating to myself that “Change Is Good” gives me peace of mind no matter what.

“Change” helps you learn and grow.
“Change” makes you look at everything differently.
“Change” presents new and different opportunities.
“Change” will help you findout where you REALLY belong.

I could go on and on.

AND DON’T TOUCH THAT 401K!!!

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avatar Frank

“You can liquidate and withdraw any amount you’ve invested in your Roth IRA for the current tax year without any taxes or penalties”

I have read many many times that ALL contributions – not just current year – can be withdrawn at any time – just never the earnings.

You may wish to check this for the sake of your readers
http://www.irs.gov/publications/p590/ch02.html

-Frank

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avatar Luke Landes ♦127,535 (Platinum)

Frank: You are correct — I’ve adjusted the wording above. Thanks!

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avatar pam munro

As an actress/artiste who is ALWAYS looking for work – I also recommend:
#1 Trying to live below your means as much as possible. #2 Try pennypinching and other ingeneous methods to get what you want at less than retail. #3 Be aware of useful class markers but avoid conspicuous consumption. ($800 handbags, really…)#4 Recognize that the pace of social change around us is accelerating. Protect yourself by not getting into a rut of the old ways of doing and thinking. Keep on the qui vive with your eyes and ears out for signs of shifts which may affect you and your family.

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avatar Greg

Saving is important, but so is not spending yourself into a hole when unexpected bills appear on your doorstep. One of the cardinal mistakes people make, especially younger savers, is to presume that credit cards or other short-term money sources are a good “life preserver” should health problems or, say, an auto accident impose sudden expenses.

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avatar NZbird

Keep your food pantry WELL STOCKED. I mean food is an essential right. And if you have kids you don’t want them stressing out because the basics like food aren’t there. So stock up your pantry real good with all the ingredients for meals. I try to keep around 6 months supply on hand. My husband use to laugh at me when I started doing it, but you know it introduced a discipline into our grocery shopping that wasn’t there before. Over time we actually saved heaps of money which was quite a shock. That was because we were buying to a list to top up supplies and nothing else. It created quite a bit of security too. The kids always knew the ingredients were in the cupboard for lunches, breakfast, and any snacks they wanted to make. I believe it’s that feeling of security and hope for the future that must be maintained for the sake of the children in times of job loss.

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avatar AndyS

Great post and one to bookmark for future reference. I have put down a list of things I think one should do to prepare for a lay off at : http://www.savingtoinvest.com/2008/03/tips-on-preparing-for-potential-job.html

A number of the points are similar to yours with some tangents.

Thanks, Andy.

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avatar Greg Miliates

While these are all great suggestions, there’s a gaping hole in the overall approach, since it assumes you need a job at all. I used to have a day job, and after the company was acquired, management changed, etc., people started getting worried about losing their jobs–especially people like me who had been with the company for several years and who were in the upper tier, salary-wise.

I eventually started my own business (that was 4 years ago), and have quadrupled my former salary.

As a business owner, I’m actually MUCH more economically secure than I ever was as an employee. As an employee, I was completely dependent on the paycheck from my employer, and if they decided to lay me off, I’d be in dire straits. But as a business owner, I have dozens of clients, and if any one client doesn’t need my services, other clients do (not to mention that I can get additional clients), and my income–while somewhat variable–is much more secure. Even if I lost half my clients, I’d still be OK.

So, while starting a business on the side involves work, I truly believe that it’s not only a great “insurance” policy in case you lose your job, but it’s completely changed my worldview to the point where I doubt I’ll ever need a “real” job.

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