Career Management Requires Financial Management

By Scot Herrick | Personal Finance

Aug 20

Can we make an assumption that at some point in your career you will be laid off?

We change jobs often. Company competition, especially global competition, is fierce. We may not by unemployed, but the corporate churn in terms of reorganizations is unrelenting. The probability of something bad happening to your position goes up every time you have a manager change.

If the circumstances are constantly changing, what can really lower your stress?

Protect your career through financial management

When you lose your job, you can lose a lot of different things. But one thing you will lose is your income. Losing your income will drive your behavior – and your career – faster than any other item you lose in a layoff.

If you lose your income, you also lose your health insurance. Or, if you have COBRA, you will pay a lot of money (my family plan was $1200 per month) for keeping it. And you should.

Living from paycheck to paycheck in this type of environment puts you under the gun quickly to find a new job. And that’s where the trouble starts happening.

Career management and desperation don’t mix

If you are in a situation where you live paycheck to paycheck and you are laid off, the money quickly disappears. In order to continue to live, you start making decisions based on getting the income back, not what is best for your career.

You start not paying your bills on time – affecting your credit rating and the interest rate you pay on any credit cards. Unfortunately, companies are now looking at your FICA score as a factor in their hiring decisions and your lack of financial management is now making the hiring decision tougher.

You start looking at jobs that are below your current level of employment. Sure, you need the money, but now the hiring manager starts to question whether you will really stay in a position that is a step down from your previous position. If you can’t answer the good questions about why you really want this position when it is a step down from your last one, you won’t get the job – making your situation worse.

It is an ugly spiral.

Career management requires one year’s take home pay in the bank

Yup. One full year of take home pay.

Not your 401(k) deduction, but all of your food, utility, bills and minimal social activity needs now a part of your paycheck needs to be in the bank. And don’t forget $1000 a month for health insurance.

I understand it is hard to get to this point given the current price increases in everything and the salary increases of not-so-much. But that makes socking the savings away that much more important.

Desperation and getting another job don’t go well together. Keeping your career on track while desperation accompanies you in your search won’t work.

There are enough issues with being laid off and having to recover. Getting your finances right through a year’s take-home pay in the bank gives you the time to find the next position that is right for your career.

What has been the longest you’ve been laid off?

  • Scot Herrick says:

    Three months, I would think in today’s market, would be on the low end until finding another position. Good going!

  • I have not yet had the misfortune of being laid off (knock on wood) but I am really glad I read this post. It reinforces in my mind the vital necessity of keeping a healthy savings account, even if the reason why may not be immediately self-evident. It just doesn’t make sense to take chances in this economy, and having a year’s worth of take-home pay in your savings account has the capacity to save you from a world of hurt.

  • Scot Herrick says:

    @Erika with Qvisory – Exactly. People miss out on how many emotional issues come with a layoff and how much pressure is put on the family when the money starts to run out. Savings in the bank, while not endless, relieve stress and allow you to pursue the right job. It is a great equalizer.

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