What is the Financial Forecast?
Lee Rosenberg, CFP | October 8th, 2008It seems that every day brings another story about rising unemployment, massive layoffs and more business failures. Not surprisingly, when the economic news is this bleak, it doesn’t just affect those who are out of work. The aftermath of this financial crisis has the potential to be an equal opportunity destroyer, just like the recent Hurricane Ike. Everyone is in its path and the key to survival is planning ahead.
Here are a list of topics we will be examining over the next few weeks that can be included in your personal survival kit. Like the all important flashlight, it will shed light and help keep you out of the dark.:
1. Setting up emergency funds
2. Dealing with a job loss
3. Replacing your health care plan if you lose your coverage
4. Harvesting your assets for income
5. Restarting a new career
6. Rolling over your retirement funds
7. Understanding your severance package
8. Starting a consulting firm or new business
9. Considering relocation
10. Beginning a new job search
What I Know That You Might Not
Q. My husband’s company is downsizing and he might be laid off by the end of the year. I work part time at the mall and my boss said that even with the holiday coming up, my hours might be cut. How do we brace for the worst?
J.A. Utica, NY
A. These ominous business forecasts are starting to resemble the warnings we get when a new tropical storm might turn into a major hurricane. But just as we have to batten down the hatches to prepare in the event the storm strikes, so to do we have to get our financial house in order and protect it from strong gusts that could damage everything we’ve worked for.
Here are the worst things to do, and then the best.
The 3 Worst Things People Can Do in the Event of a Job Loss:
1. Assume that the storm will blow over and they can ride it out because they’re experienced and qualified and surely another company will be happy to hire them, even in a down cycle.
2. Not cut back on discretionary spending because they believe that it’s not out of hand and doesn’t add up to much. Besides, they can always pay the credit card minimums until they’re working again.
3. Not evaluate their portfolio and subsequently make changes that will protect and preserve their assets. The do-nothing approach can be disastrous when the clock is ticking. Time IS of the essence.
The 3 Smartest Moves to Make in the Event of a Job Loss
1. Don’t panic, plan it. Create a budget and a timeline, identify non-essential spending and anticipate the biggest upcoming expenses such as tuition payments, medical bills, taxes, etc. If you have a strategy, you’re less likely to make impulse decisions that cost you in the end. It’s like showing up to the supermarket with a list. Stick to the list!
2. Set up an emergency fund account to cover overhead for the first three to four months. Use severance and vacation pay, royalties and commissions and your money market or savings accounts to help shore up the fund. Don’t liquidate assets that are earmarked for more long term gains
3. Invest your emergency account in conservative, liquid instruments such as savings accounts, 90-day bank CDs, money market mutual funds and short term Treasury bills. Also, keep lines of credit available for real financial emergencies.
We never know what impact a storm will have on our financial house, but we do know that adequate planning can mean the difference between holding on or getting swept away.
Related posts:
- Know When to Hold, Know When to Fold Capitulation sounds like one of those SAT words you can...
- 2010: Are you Ready for a Financial Makeover? The launch of a new decade is a great time...
- The Easy Way to Add Value to your Financial Assets As you attempt to build your financial life over the...
- The Half Time Report from the Financial Sidelines Given the daunting political and economic climate, doesn’t it sometimes...
- How to Choose a Financial Advisor In the midst of all of the economic turmoil, everyone...
Related posts brought to you by Yet Another Related Posts Plugin.
Tags: economic crisis, financial planning, lee rosenberg, lifestyle changes, us economy
About the Author: Lee Rosenberg is the Co-founder of ARS Financial Services, Inc. As a Certified Financial Planner with more than 34 years of solid financial expertise. Lee is a registered representative of Cadaret, Grant & Co., Inc. He was also named one of the top 25 Independent Financial Advisers in the US by Rep magazine.
