15 Steps BEFORE getting laid off, quitting, fired or taking a severance

May 25, 2022 | Blog, Newsletter

(Eric Note: I fixed the graph for the FED. We are slightly off on the bullseye; the bottom scale is a little off too Federal Reserve graph makers…)

“Right now, in the labor market, there are two job openings for every unemployed person. It’s at a historically high-level.”

– Federal Reserve Chair, Jerome Powell – 5.12.2022

The Federal Reserve has a dual mandate: “price stability (they are serious this time…Maybe) and maximum sustainable employment.” In March, inflation was the highest in 40 years, and unemployment was the lowest since 1969, or 53 years.

What do you think the federal reserve is going to do next? Lower unemployment, or lower inflation?

So, your (and everyone else’s) help is not wanted! Maybe it hasn’t sunk in yet, but we could start seeing a lot of folks losing their jobs. If we do, here’s a checklist…


A financial checklist

    1. Open a Home Equity Line of Credit (“HELOC”) before you are no longer employed. You won’t qualify for it without income verification. This could be a lifeline, so you don’t have to sell positions in your portfolio at a loss, or take on credit card debt.
      1. A HELOC can be used on your primary residence. Usually, these are lines of credit that can go on-top of your mortgage from around 85% to 95% combined loan-to-value (including your primary mortgage). It takes around two weeks to 30-days to get one underwritten, in my experience.
        1. In 2008, many banks froze these lines of credit. So, you may want to advance it before you need.
    2. Open an Asset-Backed-Line of Credit, this is another line of credit using your non-retirement accounts. Another lifeline to get cash fast. It could take up to a week to open.
      1. Usually, you can get up to 75% loan-to-value on your portfolio, so you don’t have to sell positions at losses.
    3. Emergency funds are not meant for risk or a little more yield (in this case), Someone I respect says he always invests his emergency fund. Not if you face this. It’s the time to have cash. No, not short-term bond funds either. Not something with a tiny more yield (at this point). Yes, even with inflation. A minimum 3-months up to 12-months of your living expenses in cash, might make sense.
    4. Technology, access, contacts, Take what you need. Don’t get yourself in trouble (e., sued), many times your computer/physical access will be removed. Files you download will be tracked, so be careful, and take caution. Print annual reviews, positive e-mails, and awards.
    5. Negotiate, can you stay on a little longer? Can you move to another department? Could you move locations and keep your role? Could you take a pay-cut? Can your RSUs, or PSUs vest still? If you need something or want something, ASK! Don’t be afraid, let them say “no.” Anything is possible if you get the right person. One more thing, severance in many cases does not get better for folks who stay, it gets worse. There’s less cash.
    6. Start job searching now: Know your story, network, hire a resume writer, and get that new head shot for LinkedIn, start immediately. Mock interview, and know your story. What makes you great? Can you walk someone through your experience? It takes a fair amount of practice.
      1. Start while you are employed, it’s much easier to get a job and have leverage for your compensation while you are employed. Network with anyone who could help. Stay positive and help others.
    7. File for unemployment if you qualify, This is something to understand before you exit your job. If you are fired, it is usually much tougher to claim.
    8. More taxes might be coming, be prepared, you might be paying A LOT more, if you get your PTO, severance, commission, and bonuses all paid at once. Plus, you won’t be able to contribute to a 401(k), or deferred compensation if your employment is terminated.
      1. Timing, can you request any of these cashflows be paid out next year? Maybe keeping you in a lower tax bracket?
      2. Tax-loss harvesting, this can be a huge blessing if you need liquidate your long-term capital gains or short-term capital gains in your employer stock to raise cash. Without tax-loss harvesting, this might increase your taxes even
      3. 401(k), wait before you roll this over if you are doing back-door Roth’s, and consider suspending contributions until your employment gets clearer, or maybe you need more
      4. Heath Savings account, maxing this out will bring down taxes, if you can afford to lock up cash for medical expense needs.
    9. Stop buying-the-dip, and instead sell-the-rip, do you need cash? Is it all invested? In the past, we have been taught as investors to “buy-the-dip.” It’s worked well in the recent past. But in a bear market, you might be catching a falling knife. Especially, if the fed is withdrawing liquidity from the market, and raising interest rates instead of stimulating the economy during declines.
      1. Sell the rip, sell during momentary periods of market advance, while the market is in a longer-term is decline.
        1. There can be many bear-market rallies, before the market finds the bottom. If you are totally invested, or need cash, you might want to wait before selling, or investing more.
    10. Health insurance, “It’s expensive Eric!” I hear this a lot.
      1. COBRA, or health insurance on the exchange is pricey. I’ve seen premiums around $900 to $1,850. For either, but a medical emergency without insurance is a number one reason for personal bankruptcy.
        1. With COBRA, understand how long the employer subsidy with insurance will last, and if you can retroactively sign up is also important. Get the work done or go see the doctor now. Especially after COVID, it’s hard to get a medical appointment that isn’t months away..
          1. Dental too. Get the cleanings or work done that you need before you may be paying out of pocket.
          2. Vision as well. It’s a lot more inexpensive to get this work done with your coverage.
          3. Flexible spending account, try and use this up, or understand how the left-over portion can be used with COBRA.
        2. Faith-based insurance, do your homework on the pre-existing, and faith-based exclusions, and limits with Health Savings Accounts.
        3. Cash, or no insurance is an option, but some states enact penalties if you are covered.
    11. Pause big purchases, yes primary housing too, maybe you are in the camp that single family homes only increase in value, okay…just stop reading here (kidding). For everyone else, it may be time to pause a purchase of a home, car, or other larger purchases. Even if they are zero percent loans, which I don’t see in (m)any purchases. Especially with increases in interest rates.
          1. Yes, there is historically low housing supply. Yes, institutional investors could buy more. But! Single family homes values are one of the last assets to meaningfully decline, yet. With an increase in unemployment, will this help people afford a larger mortgage? What if they need the cash? Maybe I’ll be wrong, but give it some thought.
    12. PTO, Severance, Commission, bonuses, make sure your paystub is totaling up correctly. If there is a wrongful termination or a discrepancy, don’t be afraid to ask an employment attorney for another look.
    13. Disability and life insurance, both commonly overlooked. If you have pre-existing conditions, either can be a challenge to get outside group coverage. Many clients are shocked at something they pay a few dollars for is now thousands with disability insurance. Disability must also be underwritten with income.
    14. Pension and Deferred Compensation, if you have a pension, does this change your crediting, and/or your final benefit? Do you have any elections you can or need to make? For deferred compensation, some plans will restrict or remove benefits, depending on when and how you terminate employment.
    15. Equity compensation, what is guaranteed and what is not? What is the vesting period? What are you entitled to in termination? All the equity compensation flavors work differently: ISOs, NSOs, RSUs, PSUs, etc,.

The Fed might be targeting YOUR job!

I hope I am wrong, and the federal reserve does not cause a wave of unemployment to bring down inflation. But, at this point they are just a little off on the bullseye.

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