I’m seeing a lot of evidence that the economy is slowing down. There’s a good chance, a strong likelihood even, that we are going to fall into a recession.
So, where does that leave you?
We live in a mostly free market economy, where most people work in the private sector. That means you could lose your job at any point, and a recession increases the likelihood of that happening.
Now, you’re probably thinking, “Not me—I’m a high performer. They can’t do without me.” I have no doubt you are a high performer, but your company can, in fact, do without you. People get laid off all the time for reasons that have nothing to do with performance. For example, if you are a highly compensated employee, your employer has a large incentive to lay you off first, before the guy who makes 40% less. It’s not personal—getting rid of you just represents a bigger cost benefit to the company.
Another reason people land on the chopping block first: no political connections. Put another way: Do you have friends at work? When I was on Wall Street, if someone senior to you had your back, it greatly reduced the chance of getting fired. This comes down to human nature—we all look out for the people we know and like.
Even then, you might be the best connected, most likeable guy, who makes an average salary… and still get laid off. Or worse, your company could go under (that’s what happened to me at Lehman Brothers).
However, there are proactive steps you can take to prepare for the loss of your job—to minimize the personal and financial fallout. With a recession looming, now is a good time to run through them…
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First, and I can’t emphasis this enough, make sure you have an emergency fund equal to six months’ worth of living expenses. Tally up the things you must pay each month—rent or mortgage, utilities, car, medical, insurance, etc. Multiply the total by six. Then stash away that much cash in an “emergencies only” bank account. Keep it far away from the money you use for regular expenses. And please, do not put your emergency fund in stocks, crypto, or any other investment. You want zero risk of loss with this money. That way it will be there if and when you need it, waiting to see you through to better days.
Second, update your resume. If you lose your job, it means other capable people are losing their jobs, too. An updated resume will get you ready to pounce on new opportunities first. Personally, I update my CV every three months or so, even though I’m self-employed. You never know when you will need it.
Third, stay in touch with friends. Not just your two best friends from college, but all the people you’ve been friendly with along the way. I make an effort to maintain relationships with people from my Coast Guard days, people from my Wall Street Days, contacts I’ve made in media. Everyone.
Pick up the phone and check in with old friends now, when you are not asking for a favor. Because it’s awkward to call someone out of the blue and say, “Hey, sorry we haven’t talked in five years, but I’m looking for a job.” Friends, friends of friends, your friend’s cousin’s husband you talked to at that barbeque last summer… this is how people get jobs—not by posting a resume on a job site.
Finally, implement a little austerity. Maybe scale back on summer vacation plans and go camping. It’s fun and a lot cheaper than Disney World. Maybe hold off on buying new furniture—your funky old couch can survive another year. People know this stuff intuitively. The trick is to do it now, so you’ve saved a little extra before we’re in a full-blown recession.
If we do get a recession—and again, we likely will—taking these steps will help get you to the other side intact. Because it won’t last forever.
Good luck,
Jared Dillian