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You may have worked only eight hours a day, but your job fueled most of what you did the rest of the time. Lose it and besides finding another one, you've got mouths to feed, a mortgage payment and a car sitting in the driveway that won't go anywhere without gas. It is for this time that financial advisors told you to salt away at least six months of living expenses. It ought to be twice that, according to Harry Millios, a former partner in Santos and Postals, a Rockville, Md., accounting firm. The reasoning is simple: It can take nine months to a year to find another position.
Millios has walked more than a few clients through periods of unemployment. The process begins with filling out a personal financial statement. You should do one each year, anyway, particularly if you have investment real estate holdings, stocks and bonds and other assets with variable values. The task is to determine your net worth, the difference between your assets and your liabilities. Obviously, the former is supposed to be larger than the latter. The goal while you're unemployed is to keep it that way.
That's the goal. Reality may intrude, you may have to tap your assets, you may have to raid them in fact to keep your house, to pay taxes, to feed the kids. So be it. Assets can be used for that, too. But not all assets are equal. Not all bills are due on the same day.
So you'll need strategy and tactics to get you through this dent in your cash flow. Use the worksheets on pages 36 and 37 to track your monthly cash flow and to assess the assets and debts that add up to your net worth.
As for now, most of the dinners, the vacations and the new "toys" are on hold. (Think of the celebration you'll have when you get another job.) You'll need to manage your money more carefully than ever. You may feel shame. Spare yourself, nearly everyone comes out of the other end of this time saying the experience gave them insights on their spending habits and convinced them to budget more carefully after the crisis was over.
Don't borrow just to keep up appearances. Involve your family, rather than hiding your ups and downs from them. Your feelings will show anyway, and you may find you are drawn more closely together. You may also find displaced anger showering itself on your family and friends. Recognize it when it appears and try to control it. If you need psychological help, don't hesitate to get it. Carrying that anger into the job hunt can seriously cripple your chances in many instances.
Work/Family Directions, a Boston-based consulting firm, offers workshops to families of its corporate clients. Seminar director Alice Freedman tells parents to assure their children that while things are not fine, they will have what they need. Parents should tell children, however, that their spending habits will change and they will have to be careful with their money. Freedman says it may help to tell teachers, friends and caregivers about the situation so they can offer support to your children.
Your financial plan while you are unemployed should be constructed to perform the same role -- protect you from fiscal harm. Look at your assets as if they are in layers, ordered according to their liquidity.
First cash, mutual funds and money markets. Then stocks and bonds, the cash value of life insurance policies, real estate. As we noted earlier, good planning before you're in trouble means you have between six months and a year of savings available to cover the portion of your regular expenses that your check covered.
Some advisors argue that this money should be above and beyond your investments, a cash insurance policy against just this sort of disaster. Whether it is that, or an integral element of your investment plan that could be sacrificed if you lost your job, it is the outer layer of your defense. Use it first, then dip into your mutual fund. When that's gone, you can move on to stocks and bonds.
Before you liquidate any of your real estate, borrow against your cash value life insurance policy or consider refinancing your home. If interest rates are lower now than when you first took out your mortgage, you may be able to refinance at the more favorable rate and reduce your monthly costs. Or you could increase the size of the loan -- that is, refinance for more than the balance due on your mortgage -- so you have some cash from the deal. To avoid shelling out your valuable funds for the up-front costs of refinancing, you could roll the costs into the mortgage, or you might be able to find a "no point, no cost" loan, though the higher interest rates associated with such loans may negate any benefit of the deal.If you have a sufficient amount of equity in your home relative to its value, you might qualify for a home-equity line of credit. In either case, with refinancing or a home-equity line of credit, you'll have to meet the lender's income and debt requirements, which may be difficult even if your spouse is employed. If you have already established a line of home-equity credit, you could tap that, in an emergency, as long as you realize that the lender typically reserves the right to take a second look at your qualifications and that you are risking your home if you encounter any payback problems.
If you must sell land or buildings, bear in mind that those assets are less liquid than other assets. You will need more time, at least several months, before you have any money from them, so you must plan further ahead as time passes.
Don't dip into retirement funds unless your back is against the wall. In most instances, you're penalized for distributions, plus you owe income taxes on the money. That's a stiff penalty for the cash you'll receive. In most instances, you'll owe the income tax due on it plus a 10% penalty. If you are between 55 and 59+ you can arrange for a regular payout of retirement funds and avoid the penalty.
Before you consider eliminating your assets, know that you can make arrangements with some of your creditors to reduce your monthly payments. Some loans can be extended, or the terms re-negotiated. Your mortgage holder may agree to smaller payments for a set period of time -- no bank or savings & loan wants to end up owning your house. Many lenders have programs for people in just your circumstances that allow you to make partial payments for a time and make up the difference when you're back on your feet.
An important note: It is key for you to remember you must make the first move when you can't keep up with your bills. You lose goodwill as a bargaining chip when you wait for a bank or creditor to contact you regarding an overdue bill.
Too many job seekers have destroyed their chances for jobs they could have had because they came into interviews with failure written all over their faces. It permeated their conversation, clouded their resume. An unemployed person carries a disadvantage into the interview that is a challenge to overcome even for those who are motivated.
Nothing succeeds like success, and being without a job is not exactly the definition of that. But you can counter that. Your situation is not hopeless. Salespeople use a mind trick you can employ to counter the rejection you will invariably feel when you are turned down for a job. Regard those seeming setbacks as rehearsals for the interview that does culminate in an offer.
Second, if you maintain the momentum of work as you look for work, you will act as an employed person and in due -- and hopefully swift-time you will be that in fact. (For more on how to keep your "gainfully employed" bearings, see Chapter 3.)
Outplacement firms stress this not only in their advice to job hunters but in the manner in which they treat their clients. If you go into an outplacement program, don't be surprised to find yourself carefully monitored, as if you were in school, with your homework -- resumes, cover letters and interviews -- graded sometimes every day. These professionals know from experience that keeping you pumped up plays two critical roles in finding you a new job.
First, if you've been in a position for a number of years you've probably lost all but the most basic job hunting skills. An outplacement firm will refresh your skills. (Of course, we'll be sharpening them in later chapters on resumes, networking and interviewing.) You're not used to being both the product and the salesperson. For most people it is an acquired skill, one that must be practiced to be perfected.
Second, you may not realize just how many people you will have to see before the odds favor an offer. The ratio you'll hear at some outplacement firms runs like this: You'll need to contact with telephone calls and letters 50 firms for every interview you land. You'll require 10 interviews to get an offer. You should have three offers before you accept anything. That adds up to 1,500 inquiries and 30 interviews.
You probably won't send out 1,500 resumes -- indeed you probably haven't done that in your life. And outplacement firms are big on developing and working many, many contacts. So your own experience will probably be closer to 50 or 60 resumes and contacts, and a dozen interviews. You'll probably get one or two offers and accept the best one without waiting to see what else comes in. But consider the initial numbers a parameter, a way to reassure you that if you don't get quick results, you needn't despair; finding a job will take more time than you want it to.
A 1993 Right Associates survey found that men and women middle managers took an average of 23 weeks to find a new position after they were notified they were losing their jobs. There's irony in these numbers. A study done in 1988 showed that female executives took an average of 16 weeks to find a new job; males 20 weeks. The Philadelphia outplacement firm said salary was the controlling factor and that women, who in the study earned 73% of what men earned in the same position, took less time to find another job because they were paid less. Today, with the pay gap closing at least some, the difference has disappeared.You probably thought you could wrap this up with a couple of phone calls. Indeed you might, if your network is in top shape (see Chapter 9 for details). But lacking that, and most people do, your job search could take at least several months.
Copyright ©1996, ProMotion, inc.
www@acloserlook.com