Create a Layoff Plan

(Notes from presentation on 6/3/04)
By
Michael C. Lapinski

Like estate planning, layoff planning is something most people put off until they have no choice but to face it!

Legal Rights

• Be familiar with your legal rights and your company's worker-separation policies prior to a layoff
• Don't kid yourself: There's no guarantee a company will offer severance, or even match the same rate of severance paid to employees laid off in previous rounds of cuts!!!!

Severance

• Companies with more than 100 employees are required to give two months' notice under the Worker Adjustment and Retraining Notification Act when making mass layoffs
• Severance packages - you may be asked to sign a contract that prohibits you from working with a competing company
• Before agreeing to sign this kind of agreement - will you be able to find work in a non-competing field - if not -
• Negotiate for a handsome lump sum or
• Consult with an attorney to help you determine whether it's a good idea to sign the severance agreement

Severance Check

• Don't blow it on a long vacation
• The longer you're out of the job market, the harder it will be to find another job and the more strained your finances will be!
• Begin search immediately, use the severance check as a financial bridge to get you from one job to the next

Unemployment Insurance

• Average is 26 weeks
• You may be able to get extended benefits which are offered during periods of high unemployment
• Unemployment insurance is taxed as regular income, however the government doesn't withhold those taxes for you!!!

Retirement Accounts

• After a layoff, there is a big temptation to want to retain ones standard of living, and when there's access to a large pool of retirement money it can be tough to be conservative!
• Do you have a defined contribution or a defined benefit plan?

Defined Contribution Plan

• Includes 401(k)'s, 403(b)'s, Profit-sharing plans etc.
  Entitled to take all of your contributions and the vested portion of any employer contributions
• If you absolutely must tap into the savings, remember that you'll be hit with a 10% penalty!!!
• If you can do without tapping into your retirement savings account, be sure to roll it into an IRA or your next employer's plan
• You're almost always better off rolling your 401(k) into an IRA because you'll have many more investment options available
• Remember, if you have any outstanding loans on your retirement plan, you'll be required to pay back the entire balance on the loan

Take Immediate Stock Of Your Finances

• Develop a short-term financial plan
• Be sure to include savings, spendable assets and income - including severance pay or state unemployment compensation
• Establish a short-term budget
• Know your bottom-line monthly needs, including how much money is required to pay your bills

You're Not Alone

• It's important to look realistically at your situation and actively involve members of your family in seeking strategies, despite the discomfort
• People who manage financial stress well see the problem as short term, but they act quickly to make changes
• Families who manage financial stress well respond to reduced income by first cutting their spending for non-essentials

Making A Spending Plan

• Make decisions about how to spend your money
• Provide for Needs before Wants!
• Match your spending to your current income
• Prevent family arguments over money

Your Income

• Add up your current total family income from all sources
• Use the take-home amount, or what you actually have to spend after deductions

Your Monthly Expenses

• Remember not all expenses are monthly
• Which expenses are essential to the family's well-being
• Which expenses have the highest priority
• Which areas can be reduced to keep family spending within its income

Balancing Income And Expense

• Cut spending
• Increase your income
• Look at your other assets
• Reduce fixed expenses

Making Your Spending Plan Work

• Writing down the plan is not enough!!!!
• Keep a record of what you are spending in each expense category to be sure you don't exceed the amount on your spending plan
• By keeping track of what you have to spend, it's easier to control your spending and live within your income
• If necessary, make arrangements with creditors to reduce payments on a temporary basis

Conclusions

• Stay focused
• Network through every possible contact
• Take care of yourself
• Do whatever it takes to make finding a job your fulltime job
• Work with a spouse or a friend to hold you accountable to your goals and to encourage you in the process

Good luck and thank you for the opportunity to help in a small way!!!

Michael C. Lapinski
Financial Consultant
Retirement Plan Consultant
Smith Barney
One Tower Lane, IL 60181
Phone: (630)-574-7303 Fax: (630)-574-7737
E-mail: michael.c.lapinski@smithbarney.com
To view my web-site, click on the link below:
Website: http://fc.smithbarney.com/michael_lapinski/