Money Saving Advice
There's more than one way to get most for your money. For more than 20 years, Gary Foreman has worked to manage money effectively. He's been a Certified Financial Planner and Purchasing Manager. He currently edits The Dollar Stretcher Web site and several newsletters. His mission is to help people "Live Better for Less."

The Dollar Stretcher: Surviving Layoffs

Question: I am frustrated by stories on conventional financial planning. I have been "downsized" three times in my career and suffered a major setback each time, so the usual planning doesn't succeed. Also, technical jobs are few and low-paying in my area so it's harder to come back each time.

A data center where I worked was closed in 1990 and it took me nine years to work my way back up to the same income. Plus, I had to "eat" my 401(k) portfolio to survive. then of course I was penalized by the government in extra taxes. Just this month, my current company downsized with no notice and I was laid off at 53. Luckily I have a good emergency nest egg, but my new job will be a $2.50 per hour pay cut. The advantage is that I'm switching to a health care company where layoffs don't seem to happen, but again, I'm working my way back up. Any helpful hints on surviving in the New Economy, where job security is nil? Nick T.

Answer: Nick is not alone. Nearly 150 million people work in the U.S. About 12 million of them experienced some period of unemployment last year (U.S. Dept of Labor).

He has already taken the first step. That's recognizing that he's responsible for providing his own security. Both in his career and in his financial affairs.

An emergency fund is a necessity. Fortunately, Nick has accumulated one. Without it any job loss will be a struggle. In fact, credit counselors say that about half of their clients were doing fine until they faced a job loss or medical crisis without savings.

Granted, saving money isn't always easy. But if you're spending all of your income now, you will not survive the lower income that follows a layoff without serious financial problems.

401k's are a good savings tool. Even if you have to take money out early like Nick. Remember that some of that money was contributed by your ex-employer. And that it's been growing without taxes. So even with the early withdrawal penalty, Nick was ahead of the game.

As much as possible, invest your 401k in something besides your company's stock. That way if the company has trouble you won't lose your job and your savings.

Nick would be wise to routinely try to figure out how he'd honor his commitments if his paycheck were replaced by an unemployment check. The U.S. Bureau of Labor Statistics (BLS) study showed the median length of unemployment was a little over 12 weeks. So his plan should cover at least three months of lower income.

Always try to avoid any commitments that you couldn't make if you lost your job. You might want a new car. But if you couldn't cover the payments during a layoff, you could lose it and your good credit rating, too.

If you are carrying credit card balances you might want to get credit insurance. It's usually not a good deal, but if you suspect a layoff is coming it will continue to pay your monthly minimums while you're unemployed.

Don't wait until you fall behind to contact your lenders. As soon as you lose your job talk with them. Some may offer to reduce your minimum payments until you're employed again.

If you can't keep up, consider credit counseling. It will affect your credit rating. But continuing to fall farther behind or a bankruptcy would be worse.

Expect to not only change companies, but also to change careers during your life. Very few career paths will remain the same for three or four decades. And the jobs that offer more advancement are the ones most likely to change.

A BLS survey shows that about 45% of displaced workers received advanced written notice that their jobs were going to be eliminated. Unfortunately Nick wasn't one of them.

But there are often warning signs. When you do the same work as younger, lower paid workers you're in jeopardy. Also, watch your company for signs of trouble. A company that struggles for earnings each quarter or a change in management could be a sign of impending layoffs.

Check job openings in your field even while you're employed. A lack of openings isn't good. Especially as you get older and farther up the pay grade. Let's face it. A higher salary makes you less attractive to prospective employers. BLS studies show that older workers have a harder time finding comparable employment after a job loss.

Continually learn new skills. As jobs change, so must you. What will you need to know to hold your job in three years? And do you have those tools or do you need to learn them?

Be realistic in your expectations when searching for a new job. Of the people who lost their jobs 24% took a pay cut of 20% or more. Don't turn down a lesser paying job because you're holding out for something that doesn't exist.

Nick has proved that you can survive in uncertain times. It's often a challenge, but it can be done. Let's hope that his new job is a great one!

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Gary Foreman is a former purchasing manager who currently edits The Dollar Stretcher Web site Contact Gary at You'll find hundreds of free articles to save you time and money. Visit today!