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While “Hiring Now” signs dot storefronts and highways across America, the job market may be starting to cool. The Federal Reserve’s decision to bring down inflation by raising interest rates has some projecting a slowing economy — and slower sales — leading to job losses.
Employers are beginning to rescind job offers.
I know one person who has already had this experience — and other companies have announced that layoffs are coming. Tesla has declared it will cut 10% of its salaried workforce. Real estate firms Compass and Redfin announced workforce cuts of 10% and 8%, respectively, and Netflix is laying off 300 workers.
In addition, one executive recruiter told me companies that have overpaid people by 30% or 40% due to the hot job market have an opportunity to hit the reset button. These “last-in” jobs may be some of the first to go.
It may take a few months for any slowdown to affect your company or industry. This gives you time to prepare, especially since the ease of securing a new job is not the same as it was even three months ago, or one year ago.
Feel a layoff is looming? Here’s what you can do
If you believe a job loss is possible, here are five steps to take now.
1. Restock your emergency savings
Many people have built significant wealth over the past decade as the stock market has risen year after year. From 2019 through 2021, it could have been tempting to add more cash to the stock market for what felt like easy gains, vs. the meager interest rate cash deposits were earning. But that’s not the purpose of cash savings. It’s the base of your financial foundation, and should always be intact.
During your working years, make certain you have three to six months of cash saved to pay for essential expenses — mortgage and car payments, utilities, insurance, food, car repairs and maintenance and out-of-pocket medical expenses.
I have found most people often don’t know how much they are spending. I suggest taking your net take-home pay each month and multiplying it by a factor of three or six and save that amount. Depending upon your comfort level, it’s also fine to have closer to 12 months of cash expenses set aside.
2. Review expenses and pay down debt
Once your emergency fund is in place, review your budget to reduce as many fixed monthly expenses as possible.
If you aren’t watching Netflix and other streaming services as much now as during the Covid-19 outbreak, start there. Should you sell the Peloton machine, especially if it’s collecting dust in the basement? Lawn maintenance, pest control and other services may also be paused for a few months.
While you could continue paying minimum amounts on credit card balances after a job loss, it’s better if you can lower or pay off that debt now. Reducing the principal amount on credit cards and lines of credit will free up more money in case of an emergency.
3. Strengthen your job network
Ask yourself: “If I need to begin looking for work, is my network strong enough to ask for an introduction or a job reference?” If working from home has weakened those ties over the past two years, it’s time to begin rebuilding your network.
Professional recruiters are another great relationship to have. Find one who specializes in your industry, or knows your local geography well. Finally, increase your social media presence on LinkedIn.
Begin posting your ideas more often and sharing articles that relate to the industry or job you are going after. It will strengthen the chances that recruiters scouring social media for job candidates will take notice.
4. Find out how your severance package works
If your job is eliminated, and you qualify for a severance payment, the amount you may receive can vary widely depending on your position and years of service. I’ve seen people receive a few weeks of severance pay while others received up to two years.
For those receiving a lump-sum severance payment, it can feel like a windfall. But those dollars can quickly disappear without a plan. Consider these variables: How long could it take to get another similar paying job? Do I have enough to pay my mortgage and other debts for several months? Have I set aside enough for taxes?
If your cash flow is comfortable and job prospects are solid, invest some of your severance pay for long-term goals such as a child’s college education or your retirement. However, for those planning to retire in the next few years, it may be better to place the severance payment in the bank.
I advise clients to not invest their severance until they have secured a new job, or know they have enough to not have to go back to work.
5. Review stock options and other equity awards
For senior-level executives, their company’s stock may be their most lucrative asset. Many executives have amassed thousands of stock options or shares of restricted stock. However, the stock market’s drop this year means many executives have seen the value of their company stock decline sharply.
Determine how long you have to exercise your stock options, and what stock awards you’ll forfeit. Keeping the stock options until the market rebounds can make sense, if your severance plan rules allow an extended period of time to exercise.
Restricted stock may suddenly vest upon your exit from the company, which can also mean a higher tax bill. And if you are overly concentrated in your company stock, when those shares vest and are released to you, consider diversifying into a liquid portfolio.
Now is the time to prepare for a changing job market. The trends with job openings, hiring bonuses and the Great Resignation may be in our rear-view mirror now. Look ahead and secure a bright personal and financial future.
— By Lisa Brown, partner and practice area leader for corporate professionals and executives at CI Brightworth
Image and article originally from www.cnbc.com. Read the original article here.