Big companies are downsizing, and good people are losing jobs throughout the Houston area. Companies like Chevron, BP, United Airlines, Halliburton, and ExxonMobil are reducing their workforce.
A friend recently lost his job with a leading pharmaceutical company. For him, it was completely unexpected. He got the news--an immediate shock, followed by anger. It was disorienting. What should he do? He asked for advice. We offered up six tasks.
1) Take stock of what you've got.
Understand the terms of your job loss—for how long will you be paid, is there a severance payment, how long will your health insurance continue? But also do an inventory of your other assets and liabilities. Document for yourself how much cash you have. What debts do you owe? How much do you have in savings and investments? At some point, you'll need to know.
2) Decide whether you'll seek work.
If you're not yet ready (or can't afford) to retire, you'll want to register for unemployment compensation. Update your resume and network in earnest. Alternatively, you may want to take time off, change career directions, work part-time, or become a consultant. This is not an immutable decision, but thinking about career next steps will focus your attention on moving forward, part of the healing process.
3) Work on your budget.
Take a hard look at your last several months of bills. You'll want to stay in your home initially, and keep food on the table and utilities running. But chances are, you have several recurring discretionary expenses that, if necessary, you could do without. For example, if money becomes tight, how about monthly gym dues you're not using, those subscriptions and memberships you don't often use, and other entertainment expenses? You'll want to know what the burn rate is to support your necessities.
You may also need to consider applying for Social Security benefits earlier than anticipated, or withdrawing funds from your IRA or 401(k). There are trade-offs to each approach, with tax implications you'll want to consider.
4) Make decisions about healthcare coverage.
Can you get coverage under your spouse's employer's plan? Will you need to shop the government exchange for an individual policy? Most employers have to offer continuation of your current insurance coverage under COBRA, but if you're 65 or older, you should sign up for Medicare. Check out this video for the problems Medicare-eligible folks incur if they think they can rely on COBRA.
And speaking of health, make time to take care of your mental health. Too much stress can undermine your ability to deal with everything else. You know what to do: eat healthy, drink moderately, exercise regularly, sleep enough, and take care of your spirit.
5) Consider your housing options.
It's not a decision you should make quickly, but your housing situation can significantly impact your finances. Would it make sense to downsize, move to a less costly community, or should you continue to pay your mortgage, looking forward to the day when you have no rent or house payment at all?
6) Get help.
You may have expected answers when you started reading this blog, and instead, you've got a fistful of questions. It's a rough transition--going from full-time employee to the ranks of the unemployed--but those tough questions need thoughtful answers. Financial advisors have the tools and experience to help you evaluate your options, avoid big mistakes, and gain peace of mind. Ask around, check out websites, and interview to assess the chemistry between you. These are matters of consequence.
Disclaimer: The information provided here is general and intended as educational in nature. It is not intended nor should it be considered as tax, accounting, or legal advice. Investec Wealth Strategies and its advisors do not provide tax, accounting, or legal advice. We recommend you seek the counsel of your attorney, accountant or other qualified tax advisor concerning your situation.