Craig writes in:
I just found out that I’m being “downsized” at the end of the year. While I have a small emergency fund, I do have a mortgage and a bit of credit card debt. I also have three kids at home. My wife will continue to work, but she has only a part-time job with minimal benefits. I am receiving a pretty good severance package, though.
Rather than panicking, I’m trying to be calm and rational about figuring out what’s next. This made me think of you and The Simple Dollar. If you were in my shoes, what would you do?
Here are the steps I would take in your situation.
Start living cheaper immediately. This means cutting back on or eliminating non-essentials in your life. Cancel your Netflix account. Pare back on your premium movie channels. Start eating at home more. Start brown-bagging your lunch. Just use good old fashioned frugality to your advantage, because you’re at a point where every penny matters more than ever.
Move to minimum payments on all debts. If I’m making any payments larger than the minimum on any of my debts, I’d pare them down to the minimum right now. This might involve adjusting automatic mortgage payments or other such things. I just couldn’t afford those excess payments if I were in this type of situation.
Build up my emergency fund. Every excess dime I earned between now and leaving my job would go into here. Then, during my actual period of unemployment, I would use this account as a supplement to what my spouse was bringing in, if needed. This arrangement would allow me to survive a fairly long period of unemployment without getting into real trouble.
Investigate my COBRA options. If there was a health insurance need, and it sounds like there is, I would look into the COBRA options at work. COBRA is a federal law that allows you to use the health insurance provided by your former employer for a period if you pay for the insurance. If my family needed my insurance, I would strongly consider using COBRA to extend my insurance.
Polish up my resume. I would focus on actual accomplishments over the last five to ten years rather than just a long job history. I’d be better off listing things I’ve achieved and skills that are very clearly marketable than just listing all of the jobs I’d done over the years. Employers don’t care about the irrelevant job I was doing in 1993, so I’d save that line for a description of something I achieved at my most recent job.
Send an individual email to each person I know well in my field. I’d suggest that I might be looking for greener pastures and ask if they know of any relevant positions that might be available. Social connections are the most valuable tool you have for getting your foot in the door at a new job.
Hit the social networking sites, especially LinkedIn and Twitter. I’d use LinkedIn to build up professional connections, starting with the people above that I emailed. I’d use Twitter to dive into professionally-oriented conversations with people in my field. LinkedIn does a great job of shoring up the connections one already has, while Twitter does a great job of starting to build new connections.
Start building a side gig. Even with all of these things, you’re going to have some time to burn. Use it productively. Make an effort to start a side business in an area you’re passionate about, whatever that might be. I know one person who moonlights as a high school sports referee. Another person I know makes art that he sells on Etsy. The key is to start something that will bring you some income now, but more importantly has the possibility to grow into something later.
In other words, this is a time to be busy. Get started now.