Transcript:
Easan Arulanantham:
I got I just got laid off. And what should I do? You know, what is what is my checklist? What should I read game prepared for, you know, what should I be looking at? You know, there’s so many things to think about when you get laid off.
Tom Vaughan:
We saw in the summary for the market that I just presented, that first time on initial unemployment claims is up 50%, from the low that it hit back in April. And so this is happening more and more 255,000 people last week, applied for, you know, first initial unemployment. And I’ve had a couple conversations with clients who’ve been laid off here in the tech business, we’re seeing some layoffs and slowdowns and different things along those lines. So what do you do? You know, what some of the things that you should think about? Correct. And it was lots of different pieces that are out there, I’ll try to focus more or less on some of the financial ones. As far as that goes. I think one of the first things I do is to really take inventory, you know, what do I have? Right? What What assets do I have? Where are they? You know, for? Sure am I aggressively invested? More so than I should be? Because I used to have an income. And now I don’t at least temporarily, should I be a little bit more conservatively invested to just make sure I maintain principle, because the double whammy of a layoff combined with having your assets fall dramatically, would be really painful. I would probably try to avoid some of that. And, you know, and so you had a whole bunch of things when we were talking about this before two that I think were really useful.
Easan Arulanantham:
So you want to figure out if you’re a dual income household, how much of your pay is kind of disappeared? You know, is it only half done? Maybe you can figure out okay, lets me know, my insurance is okay. If I just go through my partner’s insurance, I don’t need to do Cobra. So you have to think about what is my insurance needs? Now? Do I have? If I’m the only one providing the health insurance? I have to do Cobra, what is that going to do? Because my insurance, my employer is not subsidizing anymore? How much more is that going cost me? Next is Do I have any outstanding debts, like a student loan where I could go into forbearance, you know, for six months where I don’t have to pay make that monthly payment, even though student loans right now are zero, because if you’re a federal loan, at least, but you can postpone them for six months, and there’d be kind of like there’s so accrual of interest while but you’re forced to pay payments.
Tom Vaughan:
There’s, I mean, we just answered the question about, you know, should I be cutting back because the markets coming down, we just lost your job, that’s kind of your own market, you know, downturn. So you know, what we advise, there’s still fits to go through your budget, you know, what do you have in there that you don’t really need, you know, I always look at standard of living as an issue. So there’s always something I can kind of my budget without even affecting my standard living at all, something I’m not even using anymore, gym membership, or something along those lines. But, you know, if you’re laid off, you probably should be considering some reduction in standard of living, at least temporarily, just because, you know, you don’t want to compound the problems that you have, by running into debt and doing all these different types of things, it’s time to kind of batten down the hatches on the budget side. That’s not something we really normally recommend. We try very desperately to maintain standard of living with our clients. But layoff is one of those, you know, scenarios where gotta consider it as far as that goes, because you want to burn less money, less of your cash, less of your stock bonds and other things that you’ve got out there. Sometimes it’s not possible, got to do what you got to do. You know, but that, you know, you’ll you’ll, you’ll lessen the impact by continuing to look at how you can continue to burn less cash.
Easan Arulanantham:
Right, yeah, burn rate. Hopefully you have some sort of emergency fund. Most working people that can be from 6 to 12 months of kind of that’s rule of thumb that standardization of where I have six months, and usually a lot of times with layoffs, sometimes there’s a severance package. Yeah. Another thing to consider is apply for unemployment. Do I qualify for unemployment? Can I get that at least benefit to subsidize some of my lost income?
Tom Vaughan:
Here in Silicon Valley, one of the questions we get is, you know, people have these restricted stock units and different things, and they’ll have an option to kind of buy those out. And so I’ve been involved in a couple conversations with those. It’s something to think about. It’s kind of a weird scenario to put out some I need to buy something when you’re trying to cut back. But it really depends on the situation that you’re in, whether that’s worth it or not, you know, and so there’s a whole bunch of strategies there. But don’t miss out on, you know, your stock options if you have, um, if you have any options with those. So it’s an interesting area, the whole layoff picture is probably going to pick up here, the Federal Reserve has this dual mandate, the healthy labor market and low inflation, right. And they kept rates down. And they really, really continued to purchase $120 billion of bonds a month to create liquidity with the concept of trying to help the labor market get back because it was decimated, it was 15 point 5 million people unemployed, overnight when everything closed down. And so getting that deck down to 5.9, or five points five right now where it is, is a big accomplishment. But in doing that, they kept things down possibly too long. And now they’re flipping over to the inflation side. And they will probably overdo it on that side. And when they do that, they’ll cause more unemployment than they’re expecting. Right now, their statement of economic projection that they had at their last meeting showed that unemployment would be at 4.1% versus 3.6. Now, that’s millions of jobs, right, that differential, and everybody that is out there, not everybody, but a lot of people that are out there saying well, that might be a bit low, might be closer to five, or what have you before, you can really hammer down inflation to the to 3% that they want.
So layoffs will be more common. And so you know how to deal with those I think is important. You’re gonna have maybe have a 401k left over at that place of business, you need to consider what to do with that? Do you leave it there and continue to manage it? Do they allow that? Do you roll it over into an IRA? You know, how does that work? But you have those things that you need to think about also, as far as that goes? So, anyway, that’s, that’s, that’s a good question. And there’s something you know, there’s a lot of things that can be done, we’re probably just scratching the surface on the overall list, but it’s, this is a live show, you know, we come up with these things. So you know, anyway, if you get into that situation, give us a call and let us let us talk to you about your scenario. We can run a financial plan, you know, if your client will review your plan and get it up to speed and figure out what would happen, you know, different time periods without work. And you know, the best way to do that where to get the money, right? Because that’s important. You got to be really careful where you get the money. Yes, people do wild things with, you know, they got something over here that they should be using and then they’re taking money from this other pool, which really damages them long term. So it is important to identify where to get the money from that you’re going to need to live off of.