Fall 2008
By Robert Vitale, CPA
Economic worries have been present for several months now: weak consumer spending, the credit crisis, rising energy prices, and mounting job losses. According to the U.S. Department of Labor Bureau of Labor Statistics May 2008 report, total nonfarm payrolls declined by 324,000 during the first five months of the year. Broken down further, the professional and business services sector lost 124,000 jobs, and of those positions, 16,200 have been accounting-related. Whether you’re a CPA in industry or in public practice, your companies are adapting to the new environment and changing their businesses to weather the storm. And those strategic alterations may include the loss of your job.
Job loss is never easy to deal with, even if you knew it was coming. The unfortunate experience of losing one’s job is one of the most emotional times you will ever face in your life. Money worries, for example, become predominant: How will the bills get paid? How long can I sustain without an income?
I’ve had firsthand experience in dealing with the range of emotions and financial challenges when I found myself in transition. I hope sharing my experiences will benefit and console readers who may find themselves in similar, unfortunate circumstances.
Job Loss Emotions
Job loss can be devastating emotionally, which is often amplified if it comes abruptly and unexpectedly. You may become embarrassed or down on yourself. To effectively manage your emotions, know that some of them are characteristic of any major loss in your life. While we all handle things differently and at our own pace, the feelings and emotions I went through included shock, denial, anger, depression, and finally acceptance. These feelings, leading up to acceptance, can come in any order and last for varying amounts of time.
Talking about this traumatic event is crucial for moving toward that final stage of acceptance. First and foremost, inform your family as soon as practical about the job loss. You will need their support to get through the challenges that lie ahead. Use your family as a resource. Someone may have encountered a similar experience in the past and have good advice to share.
A major trap that many in transition fall into is immediately jumping back into the market to find a new job. An unorganized and emotionally charged job search can set you back months. You may find yourself venting to potential employers and job search professionals, which, almost certainly, will turn them off. It’s better to take some time to get your emotions in check before beginning your job search.
Be mindful that those you might be venting about may need to give you a reference or may even be the next person to help you with your search. If you manage your emotions effectively, you will remove one potential roadblock to getting a new position.
Programs That Soften the Blow
There are several programs available to those who find themselves unemployed that may offer some peace of mind.
COBRA is a federal law that allows you to continue getting health insurance under your former employer’s plan for a period of up to 18 months. This will help in the short term, knowing you will have access to your existing health insurance for you and your family. The challenge is that you most likely will be required to pay the full cost. COBRA insurance coverage can be much more expensive than when your employer was contributing to your health care plan. You will only have 60 days to make a decision on whether to accept COBRA. If you miss this window, your employer is not obligated to offer its health care coverage.
Unemployment compensation is meant to provide temporary income support to people who become unemployed through no fault of their own. Pennsylvania allows for up to 26 weeks of unemployment compensation benefits. Unemployment compensation won’t make up for all of your lost wages, but it can help when you have no income coming in and are searching for a new job. File for unemployment compensation benefits as soon as possible, as it usually takes four weeks for the first payment to arrive. I found the process to be very easy. Unemployment compensation applications can be filed online at the Pennsylvania Department of Labor and Industry Web site.
Personal Finances
If your spouse is still working, make every effort to try to live on one income. One of the biggest mistakes you can make is not cutting expenses fast enough because you think it won’t take you long to find the next position. Desperate times call for desperate measures, so make sure you slash expenses.
Take a full inventory of your family’s financial health. Compile a listing of assets, including checking accounts, savings, stock investments, and anything else that’s liquid enough to use as supplemental income. Do the same for liabilities, including mortgage, credit cards, auto payments, and other monthly obligations.
Make a list of any supplemental income you have coming in, such as any severance you were granted, vacation pay, and unemployment compensation. Then review check registers, bank statements, and credit card statements to compile a list of all monthly expenses, and then divide them into essential and nonessential categories. One of the first things I did when I lost my job was to stop spending the money I had. I was surprised at how much money I was wasting on things I didn’t need, including a satellite radio subscription, daily coffee purchases, magazine subscriptions, and even the extras you pay for on your cell phone service. Adding up just a few of the nonessential expenses, I found I had saved hundreds of dollars a month.
Once you build a personal budget, the most critical thing is to live by it. If you find you were short in balancing it, then cut more expenses and think about alternative sources of cash flow to help out. This may include obtaining a penalty-free hardship loan from your retirement accounts.
Other Tips and Considerations
Getting your personal finances in order will allow for a clearer focus as you conduct a job search. Below are several additional considerations:
-- Change - If changes in your profession have been implemented, embrace them and move forward. Don’t get caught looking back in a changing environment or profession.
-- Savings - Ensure that you have an effective savings plan that allows you to maintain a reserve of at least six months of essential expenses. If you are a financial executive, you will need up to 12 months of expenses, as it may take longer to find a position.
-- Debt - Keep credit card balances low. If you currently have high balances, work on paying them down right away. Always maintain a good credit rating, because it’s as good of an asset as any when you become unemployed.
-- Networking - Devote time weekly to networking. Chances are the professional network you build will help you get back on your feet quicker than anything else you do in a job search.
Losing a job isn’t fun. In fact, it takes a great deal of effort to manage your emotions and prioritize personal finances. If you have the opportunity, take a brief break and recharge the batteries. This will allow you to be better prepared for the next opportunity. As you weather the storm, take charge of your career. Look for opportunities that you might not have considered otherwise. Remember, a time of extreme adversity may also be a time of opportunity on which to capitalize. Finally, be optimistic at all times and keep an open mind toward paths you may have never considered before.
Robert Vitale, CPA, is founding partner of Horizon Business Consulting in Allentown. He can be reached at Bob@HorizonBizConsulting.com.
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