Job security is a dodgy notion.
Just ask employees at Yahoo!. They're waiting out rumors that the tech giant will slash hundreds, or possibly thousands, of jobs to increase profitability and help rejuvenate its stock price.
The Yahoo! layoffs aren't likely to be an isolated event in the
coming year.
With the economy teetering on the edge of recession and
showing signs of an economic slowdown, so-called secure jobs really aren't.
A decrease in consumer spending last month resulted in retailers having their worst Christmas in five years, according to government figures. Add this to the stumbling housing market and the massive credit crunch, and you can see why a recession is knocking at the door.
One result of a worsening economy can be a
decrease in your salary or, even worse, the loss of a job.
You can take a number of steps to help shield yourself from the bad
effects of a recession and help you weather through with a minimum of
disruption to your personal finances.
These are seven steps to take:
1. Create and expand your emergency fund.
If you don't have an
emergency fund, make setting one up a top priority. If you do have one, take the time to reassess how much you should have in it.
With job security being a little less reliable during a recession and
finding a new position being more difficult, you may want to increase
the amount you have set aside for this fund from three to six months of
living expenses to much as a year's worth. This is especially true if you have a single-income family, are self-employed or are in a
career that usually experiences layoffs during a recession.
2. Lock in debt interest rates.
One of the actions that the government
has taken to try to stave off a recession is to lower interest rates,
which it did in an emergency session last week by 75 basis points,
and may lower them by another 25 basis points at the
Fed's regularly
scheduled meeting this week. With interest rates so low, it's a great time
to begin looking at whether it's possible to lower the interest rates
on your current debt and to lock in rates if you have adjustable-interest-rate debt.
While you may still want to wait a few months to
see if the rates fall
a bit more, you should keep your eye on the possibility of refinancing your mortgage over the short term. Also see if you can
cut the rates on
your auto loan and any other loans you may have.
3. Don't blow your tax rebate money.
Last week President Bush and
House leaders reached an agreement that they would provide $150 billion
in economic stimulus through tax rebates that will go to 117 million
families.
This includes individual taxpayers receiving $600 and
families receiving $1,200 with an additional $300 per child.
If the proposed tax cut bill goes through and you receive a rebate, be
sure to put the money to good use for yourself. While the government
wants you to spend it to help stimulate the economy, your first
priority should be your personal finances. Use it to help increase
your emergency fund or pay down your current debt rather than going
out and buying yourself new toys.
4. Pay down debt.
If you have credit card debt, you want to
pay as much of it off as possible.
Even if
you currently enjoy low interest rates on this debt, you need to be
careful. It now only takes a single misstep of a late payment on any
of your bills including those not even associated with your credit
cards to immediately hike up the interest rates that you pay to the
credit card issuer's highest rate under universal default. This rate
can be close to 30%. If this happens at a time when your pay is
decreasing or you lose a job, it can have a financially devastating
effect if you carry a large balance.
Jeffrey Strain
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