If your job's uncertain, avoid new debt
Sure, celebrate your new job, but don't invite debt to the party
Dear New Frugal You,
I've been "downsized" three times in the past 15 years, the first time after Sept. 11 and now twice in the current recession and aftermath. While I'm unemployed, we tend to run up our charge cards. I just started a new job. It'll probably take at least a year to pay off the credit cards. I'm tired of going around in circles. How do I get off this ride? -- Jonah
Congratulations on your new job! In an uncertain job market it's always nice to find employment. But, as your story shows, there's no guarantee for tomorrow. So you're wise to take steps now to prevent problems later.
Let's look at your situation from two different views. First, what can you do to keep your job. Then what can you do to protect yourself financially if you do lose your job.
Keeping your job is not easy right now. The Bureau of Labor Statistics has the unemployment rate at 8.2 percent, or 12.7 million people. An additional 7.7 million are working part-time because of the economy and 2.4 million more would like work but have given up looking. That's just under 23 million people who want to find work. What does all that mean? That many of us are justified to be concerned about our jobs.
In the short term, you'll want to make yourself valuable to your new employer. That means learning as much as you can about your job and those around you. Be willing to take on new responsibilities. Demonstrate good work habits.
It might seem like you're kissing up to your employer, but keeping the people who control your paycheck happy might be a good idea. Especially when a lot of people would be happy to take your job if it were open.
Over the longer term, you'll want to know how secure your profession is. If you've been downsized three times already, you would be crazy to think that it couldn't happen again. The natural question is: What are you going to do about it?
One thing that could prove useful is to evaluate the prospects for your industry and profession. Spend some time in online job sites. Are there many openings for what you do? Or are there very few jobs posted?
A more scientific way to check out career prospects is to look to your state government or university. The state of Washington, for example, has a workforce training board that lists which careers are in demand in the state. A search could show something similar for your area.
You might not like what you find. Many people are finding that the jobs that they've held for years are gradually disappearing, never to return again. If that's the case, you'll want to begin thinking of a new career. We won't get into how to select a career path. But recognize that it's easier to begin the search and pick up any necessary education/training while you're still employed and have your current paycheck.
Now that you have a better income again, it's time to get your financial house in order. Pay down any debts that you accumulated while you were unemployed.
Make it a priority to become debt free. Gone are the days when it was safe to make payments against your balance each month. Carrying a debt load is especially tough if you lose your job.
It will be tempting to reward yourself for starting to work again. While a small celebration is in order, don't invite new debt to the party. Avoid any commitments that you couldn't keep if you lost this job. That's especially true of any new payments (such as auto loans).
It's a good idea to consider how you'd honor your financial commitments if you had to survive on unemployment for a while. As of April 2012, the average length of unemployment is just under 40 weeks. That suggests that you need a plan that will work for at least 10 months.
I know that it's hard to save money for an emergency fund. But as soon as you pay down debts, you'll want to make it a priority. Don't get discouraged if your goal is large and appears unreachable. Any progress you make will help if you become unemployed again.
Normally, I'd advise against credit insurance, but it would make your credit card payments if you lost your job. This could be the right time to consider it, especially if your job appears to be in jeopardy.
Should you fall behind, contact your creditors immediately. Most will try to work with you as long as you're honest with them and continue to make regular payments.Is there any way to be absolutely sure that you won't ever have to look for a job again or go into debt if you do lose one? No. For the vast majority of us that's not possible. But the stronger you are financially, the easier it is to survive a time with limited income. So do whatever you can now to prepare for an uncertain future.
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