If you lose job, pay for essentials and rely on reserves


November 07, 1990|By JANE BRYANT QUINN | JANE BRYANT QUINN,1990 Washington Post Writers Group

NEW YORK -- One of the world's hardest words to say is "fired." You say, "I was laid off" (although that falsely implies you'll be laid on again). You say, "I left," not specifying how. "Fired" is a violent word, and so truly expresses the assault you feel on your sense of worth, that it's hard to get it past your lips.

But the rolls of the fired continue to grow. Private payroll employment dropped steeply in October, and the Labor Department predicts worse news ahead. Even high-profit companies "downsize" to keep costs under control.

On the unemployment lines, the color of the collar is changing. Of nearly 81,000 positions eliminated in 1,219 companies in the year that ended in June, almost half were professional and managerial, according to the American Management Association.

The traditional cushion against job loss is three months' living expenses, held in cash or other liquid assets. But the more you earn, the longer a job hunt is likely to take.

If you're fired, the first thing you'll need is a bare-bones budget. List the critical expenses: mortgage, rent, utilities, insurance, car loan, food, gasoline, job-hunting costs. Pay only these; put other bills in a box marked "later."

Then add up the income you still have: spouse's paycheck, interest from savings, unemployment pay. Write down the gap, if any, between your income and the basic bills.

Next, total your ready cash reserves -- your severance pay, bank accounts and liquid investments such as stocks and mutual funds (don't count any lump-sum payout from a retirement plan; that comes in later). If you can, take a fast loan against your home-equity line to give yourself some extra cash.

Use some of this reserve each month to fill the gaps in your layoff budget. Your goal is to cover basic expenses for at least nine months, while you hunt for work.

Do not pay what you can't afford to pay! That sounds obvious, but it's a rule of survival that fired workers often violate. Make no payments on bills that can be postponed, including credit-card bills, if doing so means that you'll run out of money within a few months.

Forget about hurting your credit rating; it can be repaired.

For every bill in the "later" box, write to the head of the credit department. Say that you've lost your job and cannot pay but will in the future. Send monthly $10 good-faith payments.

If most of your life insurance came from your employer and you have a family to protect, buy an inexpensive term policy. You can't afford not to have this coverage.

For health insurance, you have some choices. If you're married, the family may be covered by your working spouse's plan. If your company has 20 or more employees, the law lets you stay in the group plan, usually at your expense, for up to 18 months. (You have a 60-day deadline for signing up.)

Employees of smaller companies often can convert to individual policies without a health examination.

NEXT: How to handle lump-sum pension payouts

1990 Washington Post Writers Group

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