A: With talk of a possible double dip recession, a lot of people are worried about their jobs.
According to the U.S. Bureau of Labor Statistics, there was no job growth in August. The unemployment rate held steady at 9.1%, representing 14 million unemployed people, and that’s not counting the people who have stopped looking for work.
The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) rose from 8.4 million to 8.8 million in August, the Labor Department reported. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job.
So, what do I tell people who are worried they will join the ranks of the unemployed?
I tell them to prepare for the worst and hope for the best. Specifically, you have to do the following:
• If there was ever a time to have a budget, this is it. You can’t control your expenses unless you really have a handle on how money is going out of your house.
• Cut your expenses. Even if you have a steady job, it’s a good time to go over your budget and see what things you can cut.
• You’ve got to finally set up that emergency fund. If you lose your job, how long could you survive without a paycheck? For many people, it’s not even a month. Start by putting away whatever you can and increase it as you cut things from your budget. You know this. Now do it. Make it a goal to save, at a minimum, three months of living expenses.
And, this means more than your rent/mortgage and transportation costs. Add up what it costs to run your household for a month, including insurance payments, cable, cell phone expenses, etc.; then multiply that times three. Once you hit that goal, push yourself to save six months of living expenses. If you have a nice-paying job that would be hard to replace, then be more aggressive and save enough in your emergency fund that would allow you to live up to 12 months without a paycheck. You could be without a job for a long time. The number of long-term unemployed (those who are jobless for 27 weeks and more) remained at 6 million, accounting for 42.9% of the unemployed, according to the Labor Department.
• If you are hearing rumblings that your employer may be laying off people, you need to really become aggressive in saving money. If you’re in debt, and you’ve been making extra payments to dig yourself out of that debt, you may even want to pull back a little on that plan. Pay the regular monthly payments on the debt; but, anything extra you were paying should go into your emergency fund, so you can stockpile some cash.
• Find different income streams. Try to figure out how you might earn some money should you be laid off. If you’re a teacher, can you tutor? If you’re a good writer, find people who need help with their résumé or cover letters. While you hold on to your day job, look for other ways you can earn money.
I don’t want you to operate your finances out of fear, but I do encourage you to prepare yourself in case the worst happens and you lose your job.