Whacked is the term my wife and I use to describe losing a job. Getting layed off, fired, declared redundant, downsized, rightsized, capsized; you name it, it’s all whacked to us. The term conveys a certain Sopranos-style drama—and for the person getting whacked, it fits.
According to Tuesday’s headlines, another 55,000 people nationwide are going to experience that drama in short order. Often profligate in boom times, the nation’s CEOs have discovered the New Stewardship—earnestly protecting their franchises by shedding jobs like snakeskin. Wall Street loves it. The result is that many, many, more of these massacres are in the offing.
So whacking workers is the new black. What can you do about it?
If you think you are at risk (and really, who isn’t?) there are a number of strategic defensive moves you can make now to mitigate the pain. Here are 10:
- Determine your baseline household spending.
- Construct a three-part budget scenario consisting of: a) a Current Budget b) a Whacked Budget and c) an Extremely Whacked Budget.
- Itemize the specific cuts you would need to make to get from a) to b) to c).
- Move to the Whacked Budget now.
- Fund an Emergency Reserve Fund.
- Update your resume.
- Start networking.
- Make a Top 10 List of full- and part-time jobs you might be able to land.
- Cut consumer debt.
- Protect your home.
You’ve heard the phrase, “What gets measured gets done.” With money it’s “What doesn’t get measured gets spent.” As we are now at the brink of tax season, this is the perfect time to conduct an audit of last year’s spending. This constitutes your baseline budget—the amount you actually spend. If you are like most people, you will find at the core of your spending a black hole of expenses through which the money just seemed to vanish without a trace. We’ll call this the Mystery Fund. The objective is get as many expenses as possible out of the Mystery Fund.
“It’s the Little Things that Break a Budget”
As Twin Cities financial educator Ruth Hayden says, “It’s the little things that break a budget.” Big things do too. But little things happen every day and they add up to thousands quicker than you can say “Let’s do take-out.” In fact, your weekly budget: groceries, wine, take-out, dates, gas, sundries and lunches may easily add up to be more than your mortgage. So measure it, cut it by 15 or 25 percent, and you are on your way to a viable Whacked Budget.
If you are part of a couple and earn roughly half the household annual income, if one of you gets whacked you may be losing 40 to 60 percent of your income. In this case you are going to need the Extremely Whacked Budget. The only way to get there is through massive cuts, so be prepared to sell a second car, cancel a lease, move to basic cable and scale back every aspect of your personal spending.
Some part of what you save in moving to the Whacked Budget now should go into your Emergency Reserve Fund. You’ve heard the pros say you should have the equivalent of three month’s expenses on hand—only resolute savers have this. That means about one in ten families have that kind of cushion. Figure out how to amass $5,000 in six months and you’ve at least got a fighting chance. Again, you accomplish that by moving to the Whacked Budget now.
The next step is updating your resume. Everyone hates this—but there is no worse time to do it than after you’ve been whacked. So sit down now and avoid a major depressive episode later. Besides, if you do it now, you can actually use it. In fact, create three versions: specialist, generalist and lateral move.
Here is the secret of networking: the time to do it is when you don’t need anything, so you have an established resource when you do. This week’s Doonesbury s about an old colleague of Joanie Caucus who wants to get together for lunch. That can only mean one thing: he’s unemployed. My advice: pre-network. Lunch now. Catch up. Show some interest in the other person. Spend twenty minutes a day getting in touch with professional friends and then invest a little face time. If the dreaded day does arrive when the short straw is pink and has your name on it, it will be that much easier to reach out.
Where Else Would You Work?
You might as well think about this now, even if the outlook feels bleak. If you confirm your worst-case scenario you can at least consider the need for really big changes like relocation. And in the current climate, you may need to consider part-time work. Which employers might hire you in that capacity? Once you have a Top Ten list you can go about the business of determining whom you might know, or plan to meet, in your networking program. And remember, the same employer that is cutting back-end operations may be ramping up sales.
Til Debt Do Us Part
Unbearable strain in a layoff situation is most often attributed to unpaid bills. So cut the future overhead now by paying down credit card balances as fast as you can. How to do this? With some of the proceeds of moving to your Whacked Budget. Some goes to the Emergency Reserve Fund and some goes here. Then cut up all the stupid store cards you have, all the extra, redundant and even secret cards you have. There is only one reason Neimans wants you to have that card—impulse purchases. But…don’t formally cancel a bunch of cards at once. That could affect your credit score. By the way, check your credit history to make sure it is accurate.
According to the Federal Trade Commission there’s a best way to do that: annualcreditreport.com. Beware of other sites that may look and sound similar.
Protect Your Home
If you are in a subprime, Alt A or variable interest loan now, you will never get out of it if you get whacked. So, if your debt-to-income ratio is looking good and your credit score permits, get out of that crappy mortgage now! Fixed mortgage rates are low, and a mini-refi boom is in the making right now. But once you are whacked, it’s over. It is understood that there are many potential barriers to a good refi now. If you made some bad choices in the past or bought recently at the peak, your mortgage may already be upside down, for example.
But if that variable mortgage is going to reset, and does so while you are whacked, you are more than just whacked. But whatever you do, avoid the temptation of a cash-back refi. We already learned that our homes are not ATM machines.
A painful but better solution if you are already in real trouble is to take a second job now if you can find one. I know that sounds draconian. But draconian times are ahead for many, including those occupying the 55,000 positions targeted yesterday.
I never much liked the Boy Scout motto. My question was always “For what?” In this case, at least we know for what. So hang in there by moving to a defensive position now. Over the years I have learned that the Whacked Budget becomes the new reality over time to a degree that you can look back and say “How did we ever spend like that?” At the bare minimum, taking preventative action now will make you feel more in control of your own financial destiny.