By Matthew Sivertsen, CFP®, CeFT®
Uncertainty is an uncomfortable word, especially if it is being used to describe our employment! Turbulent seems to be a good adjective for 2020 in meaning characterized by conflict, disorder, confusion, not controlled or calm. Yes, that sounds like exactly what could lead some companies to question the future and consider downsizing! Corporate downsizing is when a company terminates multiple employees at the same time to save money. As opposed to termination for cause, corporate downsizing is typically not due to any conduct on the part of the employee, but rather business conditions as a whole.
If you find yourself facing this situation, what are the fundamental things to think about and focus on to try to stabilize uncertainty as much as possible? Have an emergency fund, and if you don’t have one, figure out how to get one! Most financial planners will advise having 3-6 months if not even up to 12 months of monthly living expense needs in a safe and liquid position. So yes, if someone needs $10,000 net per month to live on, then having $30,000-$60,000 if not even $120,000 available can be very prudent. If you don’t have this there may be ways to figure out how to gain this type of position within someone’s balance sheet. Perhaps by selling things you no longer need, taking an investment account and making it safe in position, or utilizing some form of bonus, stock options, vacation payouts, or other liquidity triggers that could present themselves with a potential voluntary or involuntary separation package. An emergency fund is a very effective resource to have when entering a period of uncertainty and it is for that reason that we always recommend it as financial planners. It is easy for people when times are good to convince themselves they don’t need an emergency fund, or that they should be putting it somewhere risk taking to make more interest or money on it.
Having an adequate emergency fund can take some pressure off of the uncertainty factor for a period of time until things settle down and start to become certain again. This can give someone time to network, interview, and find their next opportunities. The second most important thing to combat uncertainty is to have a cash flow plan. Here at The Planning Center, we recommend having a three bucket approach where you know what you need for fixed expenses that are in your static bucket, what you need for variable expenses each week that are in your control bucket and savings accounts for your bigger ticket goals that are the dynamic bucket. If you have a handle on your cash flow plan you can look hard at this to see if there are items you can cut down to lower your expenses in any of the buckets as well as possibly delaying big decisions and big purchases with your dynamic money. This freed up money can help fund an emergency fund more or ease the burden on the needs that you have to have an emergency fund cover.
Other things to think about are our age and location for how close to retirement we are or if we can move or not? Do we have dependent children to worry about? Does our spouse work? Can you file for unemployment? How to get health insurance? Clean up your resume and network! Everyone’s situation is different and unique but applying these fundamentals to any situation can ease some of the anxiety when we are genuinely faced with uncertainty with regards to our lives and money, but rest assured there are always ways to plan and survive/thrive through this period of time! If you or somebody you care about are experiencing corporate downsizing and feeling uneasy, contact your TPC planner – we’re here to help!
Matthew Sivertsen, CFP®, CeFT™, is a Partner/Sr. Financial Planner in the Quad Cities office of The Planning Center, a fee-only financial planning and wealth management firm. Email him at matt@theplanningcenter.com.
