How are you prepared for a layoff? As a single income provider for my family of 5 (wife and three kids) being prepared for a layoff is something I need to be ready for. I never want my kids to go without just because I've been laid off. When I talk to my grandparents about the Great Depression they often say “No one was prepared for a layoff. NO ONE!” “25% of the country was unemployed, Charlie!” Do you think anyone was prepared for that?
For me, the Great Depression left an indelible (<–that is my new buzz word for the day!) impression on me, because of what my grandparents conveyed to me. When I think about the Depression, the movie, “It's a Wonderful Life”, comes to mind. In particular the run on the banks hits home on how important it is to have a diversified layoff plan.
Poor George Bailey. Just married, and ready to go on his honeymoon. All the citizens of Bedford Falls wanting to protect their families, and get their money. It should be a reminder of the need to diversify our emergency assets, but also the need to be prepared for a layoff. A great example of this is J$'s article that I read this week (from BudgetsAreSexy.com) on “I Got Fired!“. It shows a little bit of how he was personally prepared. As for myself, here are few tips I picked up from my grandparents (from the Great Depression) and ones that I've learned along the way.
LAYOFF PROTECTION PLAN
- Cash Reserves – have 3-6 months of cash in the reserve. Based on the results of the Great Depression it wise to have half your cash reserves in a interest earning money market account and the other portion at home in a safety deposit box. That way if there is a run on the bank, then you you'll have half your cash reserves on hand. Again it incorporates not having all your eggs in one basket.
- Bank Maximum Amount of Vacation – have you considered your banked vacation as a part of your layoff protection plan? Well it's time to. Some companies will allow you to bank anywhere from 1 week to 3 months of vacation (sometimes more). Calculate the $$ value of this payout (minus taxes) and add that income to your layoff protection plan.
- Create Passive Streams of Income – are you relying solely on one or two incomes for all your family needs? Well a lot of people are diversifying their income streams by creating part time gig's (or passive streams of income). Some ideas could be to start a blog, tax lien investments (part 1 & part 2), write an eBook, buy real estate and rent it out, or even open a vineyard. What? A vineyard? Some of you must be asking “are you off your rocker, Charlie?” The answer is NO. My neighbors, who are in the Air Force, have a 9 year plan of running a full blown vineyard once they get out. They planted their seedlings 4 years ago, and are just starting to see the first of their passive income fruits. There are a lot of possibilities out there. Imagine at little!
- Reduce Variable Expenses – well duh! Everyone knows that. Not really. Most people don't have a handle on what their current (pre-layoff) variable expenses because they don't need too. They have a steady income now, so why would they? The biggest advantage you will have now is by figuring out your current variable expenses, and then calculating what you can cut back on. Most people have an idea of what they cut, but have you actually run the numbers?
- Stockpile – in order to help your family weather financial storms consider stockpiling. Buying on the cheap, and in bulk. Typically most products go on sale every 3 months, so stock up when certain items go on sale.
A lot of you that may be reading this article might be saying…“I don't need to worry about being laid off. I've got a great job, secure, and I have seniority.” Well consider this. The unemployed length is at an all time high of almost 40 weeks as of June 2011 (see latest stats here). The 8.3% of the unemployed US population was probably saying the same things you are thinking right now.
Are your currently unemployed or worried about losing your job? Do you know how long you could be unemployed for? What plans do you have to survive a layoff?