(This is part of Take Charge of Your Money, a partnership between INQUIRER.net and Citibank to help readers handle their personal finances well.)
Question: With reports of companies downsizing and laying off people, the thought crossed my mind that I might lose my job. What would become of me if I lose my job? How can one prepare for the loss of a job? I hope it doesn’t happen to me. – Nina
Answer: The global financial crisis has affected some industries around the world. Companies abroad that are into car manufacturing as well as electronics have been deeply affected. The banking and financial industry has also been hit with the collapse of firms like Lehman Brothers.
While financial experts maintain that the Philippines is still poised for economic growth this year, although at a slower pace, it does seem wise to prepare for the worst. So we understand your concern for the need to prepare for a job loss.
Here are practical ways to be prepared should you lose your job unexpectedly:
1. Build up an emergency fund to cover eight months’ worth of expenses. Financial experts have long advised people to put away an emergency fund to cover three to six months’ worth of regular expenses. With the way the worldwide economy is taking a beating, it is wise to prepare for at least eight months’ worth of expenses tucked away in a fund.
The purpose of an emergency fund, as the name implies, is to ease the financial burden on you and your family when emergencies arise. With an emergency fund, you will be able to pay your usual bills and live the way you used to until you get back on track.
‘Emergencies’ by definition here include a sudden illness, job loss, or a tragic incident happening to a member of the family. As such, refrain from touching this fund during non-emergencies. For instance, if you need money to fund a vacation, try to find other means to come up with the funds needed; don’t touch your emergency fund.
Now eight months’ worth of expenses may seem a lot and overwhelming. Start by saving regularly little by little and give up little luxuries you don’t really need. Put this in a separate savings account. In time, as you become more committed to saving, your emergency fund will grow. Then put this money to work by investing it in a special time deposit, retail treasury bonds, or money market funds so it may earn more while you don’t need it yet.
2. Update your resume. It doesn’t hurt to always keep your CV updated. Include your present job description in your resume so would-be employers can easily see what you can do. Go over your resume and keep the layout clear and uncluttered. Refer to sample resumes on the Internet or in management books.
3. Network. Remain in contact with old classmates and officemates, even family friends and relatives. Be interested in what they do and keep track of how they may be of help to you in the future. In the event that you lose your job, one of them may know of a job opening in the company he works for or in another company. Don’t burn your bridges.
4. Learn new skills. Keep yourself relevant by learning new skills. If you’re an office person, learn how to do your own PowerPoint and video presentations. Take a weekend class at a university. Classes such as candle-making, soap-making, cooking, photography, and storytelling may benefit you in the future if you’re interested in those activities.
5. Get into the habit of reading job advertisements in newspapers and websites. Find out what skills are important in the job you’re aspiring for and try to learn those skills. Some job ads also indicate the salary offered, so this will let you know how much salary to ask from your next employer. By looking at job ads, you will also be able to apply right away for a job as soon as you lose your present post.
If the unfortunate happens
If you do lose your job, don’t despair. It is not yet the end of the world. Look on the bright side and see what opportunities are open to you. Aside from applying for a new job, starting a new business is also an option.
Most companies will offer a separation pay to employees losing their jobs. Review your company manual and find out how much you are entitled to. Compute for your unused sick leaves and vacation leaves. In many cases, these may be paid for in cash by the company. Check the computation of your separation pay with your personnel department and the cash equivalent of unused leaves.
When you receive your separation pay, use most of it to beef up your emergency fund. Don’t splurge it on something you don’t really need (a plasma TV or a new camera, for instance). Use it sparingly to fund your current lifestyle until you find a new job or income source. We wish you the best!
(INQUIRER.net and Citibank invite readers to ask questions regarding financial matters. Send your questions to personal_finance@inquirer.net or comment through our personal finance blog called MoneySmarts.)
*Disclaimer: Readers are solely responsible for their own investment decisions and should thus conduct their own research and due diligence and obtain professional advice. INQUIRER.net will not be liable for any loss or damage caused by a reader's reliance on information obtained from our web site. INQUIRER.net receives no compensation of any kind from companies or industries or funds that are mentioned here.
