Shore Up Your Beleaguered Finances

Keep
Your Income Flowing

In past recessions, the little guy
or gal took the brunt of the job losses. Now, however, a high annual income —
one over $100,000 — may actually make you more vulnerable. “If
two people are in a similar role, and one is more junior on the pay scale, the
higher salary may factor into the decision,” says Emily Westerman,
associate director of the School of Continuing and Professional Studies at New
York University. In other words, if a department head is given a specific
amount to save, he or she can reach the goal more quickly by firing someone
like you — and, of course, make the lesser-paid employee do your job,
too.

To keep that job, you have to make
sure that you are (or appear to be) worth that high salary. Here are some
strategies:

Ask to help. In the aftermath
of layoffs, supervisors can feel hard-pressed. Volunteer to take on additional
responsibilities. In particular, let the boss know that you’re
willing to do nasty jobs that others may shy away from, such as cold calling,
working with a particularly difficult client, or some other nasty task.

Pursue additional training.
Are you a stock broker? Take a course to become a certified financial planner.
Real estate agents can go after a Realtor designation. Even something as simple
as learning how to build a spreadsheet or a Web site can help if it adds to
your skills and makes you worth keeping. All the better if your employer is
willing to pay. “Anyone who doesn’t take advantage of free
training is basically saying, ‘I don't care,’”
says Westerman.

Don’t share. It may
seem icky, but if you have a special skill, don’t teach everyone else
in the office how to do it. (You can say you will, but come up with an excuse
― too much work ― when asked to do so.) For instance, if your boss
wants to know how to add something to the company Web site, just do it
yourself. The more singular your skills, the better your chances for survival.

Don’t bitch —
at least not at work. In a sagging economy, everybody’s frazzled.
Don’t complain about workloads, co-workers, or even the temperature
in the office. The squeaky wheel doesn’t always get the grease;
sometimes it gets the boot. (You can vent your spleen at home to your nearest
and dearest.)

Prepare. Before you ever
receive a layoff notice, take stock of other sources of income. Will your
employer pay you severance or make good on vacation pay or bonuses to which you
were entitled? If you’re not too bitter, you might prepare to ask
your boss for a consulting contract. Even with half or a third of your former
income coming in, you’ll feel a lot less stressed. You should also
consider what the government can give you. No matter how much you earned, you
are qualified to claim unemployment benefits. If you are over age 62, you might
want to take Social Security now. If you get a job, you can always suspend your
benefits and restart them later on. Finally, if your spouse doesn’t
have a job, maybe he or she should get one to help the family survive.

Be Ready If You’re Laid Off

If despite everything you’ve done, the pink slip
cometh, don’t despair. (Well, OK, you can scream into your pillow for
a few days, then you should start your hunt for a new job.) The following are
some ideas that may help you land on your feet rather than your you-know-what.

Update that bleeping resume. “A resume
should not be a laundry list of your job responsibilities,” says
Westerman. “Instead it should show the impact you had in each of your
roles.” Examples: Increased sales by 15 percent a year; Brought back
a division to profitability; Produced 15 national campaigns.” You get
the idea.

Craft your resume for specific industries and companies. For instance, if you’re a financial services professional, have one
resume geared to brokerage houses (talk about investments) and another for
insurance companies. (If you have a Chartered Life Underwriter designation,
play it up.)

Look beyond your last job title. Consider how you can use
your skills doing something else. One great online tool is O*Net. This
helps you identify transferable skills and suggests possible careers.

Join — and become involved in — a
professional association. It can be a fount of job leads, industry news,
and other insights (for example, what sectors of your industry or profession
are growing).

Let everyone know that you’re on the hunt. You can use a network such as LinkedIn to display what you’ve done
and to find people who know people in companies and industries you’re
targeting.

Look
at Those Statements Already

You know it’s bad. Since January
2008, the Dow Jones Industrial Average tumbled some 4,500 points. That’s
likely punched a Lake Superior–sized hole in your retirement assets.
But to make a comeback, you’ll first have to assess what you’ve
got now. Then you should take your most up-to-date data and plug it into one of
those retirement calculators to see how far behind you are. (Four are listed
below.)

Odds are you’ll find
there’s a yawning gap between what you have and what you need. Here’s
what you’ll have to do:

Boost your savings. Consider
the tale of Peter, the product of Portland, Ore, financial planner Glen Clemans’
imagination. Peter, 44, was earning $125,000 in 2008 and saving 10 percent of
his income in his 401(k) along with a 3 percent employer match. His salary rose
every year at roughly the pace of inflation — 3.5 percent. The
account — earning a hypothetical 8 percent a year on average —
was worth $225,000, which put him on track to retire at age 65 with $2.3
million, enough to pay out $100,000 a year in his retirement in today’s
dollars or 80 percent of his current salary.

Fast-forward a year. Peter’s
401(k) sank to $112,500. If he stays the course, he retires with $1.5 million.
Taking $100,000 annual withdrawals, he would run out of money at 84. If he
boosts his savings to 17 percent, that is. (He’ll have to save
additional funds outside of his 401(k).) By age 65, he would have $2,141,000,
enough to last him until age 91.

Work longer. If Peter
instead retires at age 68, the extra three years of saving and compounding
results in $2,127,000 (plus larger Social Security benefits). Peter can also
split the difference. If Peter ups his contributions to 13 percent, Clemans
says he’ll be at $2.1 million by age 67.

Whatever you do, max out your
401(k). As of 2009, the maximum contribution was $16,500, and $22,000 for
age 50 and older.

Tweak your retirement portfolio’s
aggressiveness to better your chances for higher returns. “This
is a generational opportunity to buy stocks,” says Bruce McCain,
chief investment strategist for Key Private Bank. McCain suggests technology,
energy, and basic materials stocks — equities that will play well in
a worldwide economic recovery.

Resources:
Finding Out How Much You’ll Need Try these online
calculators to find out where your retirement stands:

• href="http://www.bankrate.com/calculators/retirement/401-k-calculator.aspx">Bankrate.com
• 
  href="http://moneycentral.msn.com/retire/planner.aspx">Money Central
• 
  href="http://personal.fidelity.com/planning/retirement/plan_overview.shtml.cvsr?refpr=rrc18">Fidelity
  Investments
• 
  href="http://www3.troweprice.com/ric/ric/public/ric.do">T. Rowe Price

Look
to Alternatives to Help Pay for College

Bad enough that you plunked most of
your retirement money into stocks (instead of certificates of deposit like
grandma recommended). But your kids’ 529 college savings plans got
messed up, too. Plan assets fell 21 percent in value in 2008 alone, according
to the College Savings Foundation.

Start by comparing the performance
of your 529 plan to that of others. According to href="http://www.morningstar.com/">Morningstar.com, which rates the best and worst plans, returns
in 2008 ranged from a 2.9 percent gain in a Vanguard fund to a loss of 36
percent in one Oppenheimer fund. Another source of information on 529 plans is href="http://www.savingforcollege.com/">SavingforCollege.com. (Both sites charge for
access to such data.) If your 529 has consistently underperformed or
drastically underperformed last year, you should move the money into a better
performing fund.

If your child is headed to college
soon, you’ll have to think hard and fast about what to do. One
option: have a frank discussion about finances with your kid. Most can be happy
at any number of schools, and you should be able to direct your child to more
affordable options including the state university. If your daughter is a star
in astrophysics and only CalTech will do, however, you may have to swallow hard
and do your best to raise the funds. After scholarships, your best source of
help could be grandma and gramps. If they can afford to, each can give your
child up to $13,000 this year as a tax-free gift. A loan is another option. Ray
Loewe of College Money, a Marlton, N.J., college planning concern, recommends
that you draw up a formal loan document, complete with a payback schedule and
market-rate interest. (Federal parent PLUS loans currently carry a rate of 8.5
percent.) And, adds Loewe: “Often, grandparents will simply forgive
the loan.”

After that, you’ll have
to look at loans from entities you’re not related to. The federal
direct program is the cheapest. But before you decide to go with the feds or a
bank, you should make sure that your credit score is as high as it can possibly
be. “Banks are starting to turn down college loans because of poor
credit,” says Loewe.

Never
Give Up Health Insurance

One of the real punches in the
stomach when losing a job is forfeiting your health coverage. It’s
tempting if you’re strapped for cash to just let it go —
but don’t. You can’t afford to be without it.

If you worked for a company with
more than 20 employees, you can enroll in COBRA, which continues coverage for
up to 18 months. The hitch: You’re on the hook for the premiums,
which cost 102 percent of what your employer paid — and often more
than $1,000 a month for a family. Now, however, thanks to the stimulus package,
the federal government will pick up 65 percent of the cost of your COBRA
premiums for up to nine months. The subsidy begins to phase out for individuals
with incomes of $125,000 and joint filers with an income over $250,000. (The
subsidy is only available if you lost your job between September 1, 2008, and
December 31, 2009.) You can cut costs further by taking the high-priced COBRA
plan for yourself and your spouse, but putting your kids on a high-deductible
policy; generally, kids are pretty healthy, and if worse comes to worst, you
can charge the $3,000 or $5,000 deductible to MasterCard or Visa.

If you’re still employed
but worried about your job, you should find out ahead of the axe how much your
COBRA premiums will cost. Tim McBride, associate dean for public health at
Washington University in St. Louis, says that you may want to set money aside
to pay those premiums. If you’re young and relatively healthy, you
can take advantage of a Health Savings Account, an automatic savings program
that allows you to keep the money you set aside for medical coverage if you
lose your job.