A topic that many of us may encounter in our careers is layoffs. Whether you’ve experienced it firsthand or are curious about how to prepare for the unexpected, you’re in the right place.
Jin Lee, whom I interviewed concerning this issue, emphasizes that facing a layoff can be daunting, but individuals can navigate it successfully with the right mindset and preparation. This article explores the mental and financial aspects of preparing for a layoff and how financial planning is crucial in readiness.
Financial Planning for Layoffs
One must highlight the significance of financial planning in preparing for potential layoffs. Whether you are currently facing uncertainty in your job or want to be proactive in securing your future, I will share valuable tips and strategies below,
Reading Signs and Being Proactive
Jin suggests proactively recognizing changes in company dynamics, industry shifts, or colleague discussions. It’s essential to be aware and prepared. Jackie shares anecdotes, including a client who experienced a layoff after the company witnessed three declining quarters, reinforcing the importance of reading these signals.
Jin adds that being proactive involves realistic planning. A client expecting a layoff at 55 planned for retirement, ensuring the layoff became an opportunity for exploring new ventures rather than a setback.
I would suggest that you consider job stability realistically. Specific industries may offer high pay but lack stability, necessitating a robust plan B.
How to Pay Bills
Jin addresses the scenario of short-term layoff preparation, focusing on two critical questions: How to pay bills, and how will the layoff impact long-term goals like retirement?
Negotiate a Severance Package:
Seeking a lawyer’s assistance and negotiating a favourable severance package, like one year of salary continuance, can provide a financial cushion during the job search.
Employment Insurance (EI):
While EI may not fully replace earnings, it is a financial supplement during layoffs.
Emergency Savings:
Emergency savings become a crucial source if severance and EI are insufficient.
Line of Credit (LOC) or TFSA:
Depending on market conditions, drawing funds from a TFSA may be more advantageous than securing a line of credit. It would be best to secure a line of credit while employed for favourable rates.
Temporary Jobs:
Finding a temporary job is a strategic move to supplement income during the transition period.
Impact on Other Financial Goals
I encourage viewing layoffs as opportunities for new chapters in life. A client working overseas, laid off at 55, found peace of mind realizing she could retire anytime, offering flexibility in pursuing passions.
Jin emphasizes the importance of understanding illiquid assets, as clients with substantial illiquid assets may not feel wealthy despite being financially secure.
Clients laid off often leverage the situation to pursue passions or new careers. Salary continuance allows for a smoother transition period, and financial planners play a crucial role in scenario analysis and budget adjustments.
Negotiating Severance Packages
I would suggest against hastily accepting severance packages. Options like salary continuance and maximizing RRSP contributions should be considered for optimal tax benefits.
Seeking Help and Shifting Mindset
I can’t stress enough the importance of seeking help when dealing with layoffs. It is crucial to shift one’s mindset away from self-blame. One can explore ways to turn challenges into opportunities by focusing on mindset.
In conclusion, combining financial preparedness and a positive mindset equips individuals to navigate layoffs effectively. Proactive financial planning, negotiating severance wisely, and viewing layoffs as opportunities are vital strategies for weathering uncertainties. Please remember that seeking professional advice during such times is very important. If you’re facing financial challenges or contemplating a layoff, connecting with financial experts ensures you start the next chapter of your life on a solid footing. Reach out to us at Jody.euloth@askjackie.ca.