Budgeting for Layoffs?

The Waxed Yak asks: "After reading the Slashdot tech worker unionization story, I started wondering: What are other IT workers doing to prepare for potential layoffs?" "We're all at risk of it, be it from actual layoffs or loss of employment for other reasons. My personal approach has been to live off about 1/3rd of my earnings and bank the rest, even though that means living in a hovel and driving an older car. Worst case scenario, I get to retire early.

I recently became completely self employed, which has made it all the more important to save. I understand many Slashdot readers have families to support, so they don't have the same option for savings that I currently enjoy. As I hope to have a family to support in the near future, I would be interested in tips or techniques to prepare for this situation. Judging by the posts in the unionization thread, many of you are dependent on a steady income to provide for their families. Hopefully this thread can provide some ideas for them as well."

Comments

Question or Comment???

[ericspinder]

The Waxed Yak asks "When I did work for someone else, I saved 2/3rds of my pay, but since I'm now self-employed, I'd like to really brag", "what guestion do I have to come up with so I can say so on Slashdot?"

Re:Question or Comment???

[Richard Steiner]

Long layoffs are often just a case of bad timing.

I had a bit over 13 years of experience as a programmer/analyst when I was laid off in January 2002, mainly weird languages like Fortran and assembler and various macro languages, but also with some decent experience in C, Perl, Pascal, REXX, and a number of other more mainstream languages, experience with RDMSs like Sybase, as well as a LOT of medium- and large-scale applications design and high-pressure support experience.

I got nothing at all except one 8-month contract at the end of 2002 and a six-layer interview in Seattle in the spring of 2003 until I hit the jackpot and got a pair of out-of-town job offers at the same time in the fall of 2004.

I think I had a grand total of five (5) interviews in total during that time, and three of those were for positions outside the Minneapolis area.

I think one of the main reasons I had such a hard time was the fact that I was laid off a few months after 300-400 or so other experienced folks were laid off from my ex-employer (Northwest Airlines), so the marketplace was chock full of experienced UNIX and IBM mainframe people (the two most likely places for me to find employment) well before I found out that I was also in a position to have to find work.

I thought I had dodged the axe already by surviving the large initial wave of layoffs, but I was wrong.

A second reason was the fact that people tended to focus on the Fortran on my resume, so I ended up removing that and only stressing the UNIX-related things I had done and worked with when applying for such positions. It didn't do me any good.

A third reason was the fact that, because it was very much an employer's market in the Twin Cities at that point in time (and it still is), companies seemed to be looking for very VERY specific things.
I rarely got interviews as a programmer because companies wanted people with not only TECHNICAL skills but also specific INDUSTRY experience with medical products, or with insurance-specific EDIFACT formats, or with some specific image format, or even with company-specific internal products in several cases, and that ended up weeking me out early (in many cases I called HR to try to obtain some info about why I couldn't get an interview, and I heard all kinds of things along those lines).

I was also told on several occasions that I was overqualified for a programming position or a PC tech support position -- that they were looking for someone with 3-5 years of experience, and that they felt my 13 years made me too expensive (hey, a pay cut would have been FINE with me!), or made me a risk to leave later.

Etc.

As I said in another thread, I still know a few folks who are bouncing from contract to contract, and it's been almost five years now for those people. They *still* don't have a permanent (non contract) position.

You've apparently had it easy. My first layoff was back in 1993, and that wasn't so bad. Took me around ten months to find work that time. This last one was a LOT rougher. I didn't expect to have to look for almost three years, either. It's a good thing I had taken the time to prepare myself financially beforehand. If I had been completely unprepared, we'd be a lot worse off today...

Me personally

[mikesd81]

Right now I'm a machine operator @ Sealy components. It's a mechanical job. Yes I'm a geek, but I like mechanics too. There's 2 things a people will always have (relative speaking, let's not nit pick here): an automobile and computer.

Also, no matter how automated a plant may get, there still needs to be a person to fix the machine when it breaks.

Okay so my point is to always have a back up plan to fall on. You have more interests, I'm sure, than just computers. Capitalize on them. Wheather it be mechanics or landscaping or whate have you.

In the last James Bond movie to feature Q: "Never let them see you bleed, and always have an escape plan."

Other fields

[heinousjay]

Work on your smooth pimp game, round up a stable of hos, and watch the money roll in with a modicum of effort.

Sure, pimpin ain't easy, but that don't make it hard.

Budget

[daeg]

I'm in a two-income no-kids (DINK) situation. I'm still paying off student loans. We live very comfortably but I have a strict 20% to retirement rule. For the past two years (roughly) we've been putting 30% into general savings. We could reduce it easily since we both work in very steady industries (him: high rate commercial insurance, me: television station). It is nice to know that just on the general 30% savings one of us can be without work for years and we'd never have to tap retirement. BTW - I'm 22, He's 30. Still a long time until retirement and our health care costs are quite low.

However, as such, that money is invested quite aggressively. I make stock purchases that tend to be risky. Of course, it has paid off even in the short run, with the 30% savings pushing near 45% annual gain (not including additional cash put in).

I'd rather live modestly for a long period of time than live well and spend a lot only to lose a job and have to risk moving back to a frugal lifestyle.

Re:Budget

[Money for Nothin']

Actually, there is a very good reason why investment and savings are considered to be the same thing: it's because they basically *are* the same.

Look into how a bank makes loans, and what it does with your money when you "save" it with them. They don't keep it locked in a vault for you, like money under a mattress; they loan it back out to people, and pay you out of their fractional reserves when you come calling.

In essence (and I'm glossing over a lot of my Monetary Policy class in college), the bank is making an investment on your behalf. They charge a higher interest rate to the loan recipient than they pay you to keep your money "saved" with them -- this is how banks make a profit.

I mentioned being paid out of the bank's fractional reserve. Because the bank has loaned-out money to people (businesses and individuals), it doesn't have everybody's money at the bank -- it's out being spent by somebody else who thinks they can turn a profit and pay back the bank with the money they make. What happens if everybody goes to the bank and demands their money back, and the bank doesn't have enough available -- i.e., what happens if you see a bank run? Your bank borrows what they need from other banks. Worst-case scenario, they go to the "bank of last resort", a.k.a. a Federal Reserve bank. The Fed waves a magic wand (seriously, it is not transparent enough for anybody besides the Fed to know precisely what they are doing), buys/sells bonds through "open-market operations", and as necessary, creates new money -- which causes inflation. In essence, if the Fed can't handle a bank run (the last time this happened was just prior to the Great Depression, and in fact, is considered by most economists now to be the reason the Depression was as bad as it was), we're all hosed. That said, since the Depression, it has handled some monstrous ones (including Russia's failure to repay its bond commitments, which led to the decline of the Ruble, causing the collapse of some big-name financial firms like Long-Term Capital Management). (OK, I'm not glossing-over as much Monetary Policy as I thought I would...)

Here's a dirty little secret about the FDIC, which insures the money you "save" at the bank: the FDIC only insures about 1-2% of the nation's fractional reserves. Hence, no matter how you slice it, If another Depression-style bank run occurs, we are all fucked.

In truth, savings and investment are considered more-or-less the same thing by economists today, because in the end, they *are* the same thing.

Yours,

A youngster who "saves" in mutual funds... (and in a high-rate savings account, and only what is necessary for paying bills from a checking account. Most of my savings are in my 401k for retirement though...)

Give up

[cubicledrone]

What are other IT workers doing to prepare for potential layoffs?

W-4 employment, along with nearly all IT "skills" is obsolete. Companies and the people who manage them no longer have the huevos to employ people. They would much rather shirk their responsibilities to the communities they insist on shoving their products at. They want it all for free. They want free access to free markets with free labor and free equipment, free buildings, free services and free use of all the infrastructure necessary for them to stuff their own pockets at everyone else's expense. Oh, and if you're about to reply "taxes," save it. Businesses pay no taxes other than sales, which is actually paid by the customers.

When asked, they will screech "free markets" and "capitalism" and "being competitive in the global marketplace" which are all euphemisms for "ram tall dollars into my pockets and fuck everyone else." "Sell the seed corn," they say. "We don't need the farm after I'm done shoving cash into my pockets." Of course all the people who depend on that farm so they can eat? Well, fuck them. They should go retrain so the next asscrack lying piece of shit can have a chance to fire them.

We, as a society, allow corporations the LUXURY and PRIVILEGE of being able to operate as corporations in exchange for certain benefits to society, among them the creation of JOBS and CAREERS and the availability of products and services. Business, naturally, is trying to fuck society by keeping the quo and not exchanging the quid, precisely the same way they are unfairly refusing to honor the original deal in the copyright laws. The reason is because they want everything for free.

Business wants free labor. If they can't have that they want slaves. If they can't have that they'll just fire everyone and close the store/factory/whatever. Profits are more important than not fucking over their neighbors and customers. When people question their hiring decisions they screech "marketable skills" without ever actually explaining what those are. Yet another scam and another lie from a bunch of rat fuck lying cheat phone-flipping asscracks.

Best way to prepare for a layoff is not to buy into the scam of W-4 employment. It's a fucking scam.

we IT workers are the most advantageous

[unity100]

when it comes to layoffs.

Especially programmers, designers, web developers, or any information technology service or counseling / technical support, anything that can be performed remote :

We have the internet.

When you get laid off, even in the u.s., you have the chance to put your resume & experience in a post titled 'experienced ..... looking for work/taking on projects' and shortly you get many inquiries.

Sure wages are not that high, comparable to when you work full time on-site.

But then again, a hourly $15 should be enough thinking you are working from home ? or from a remote site on vacation - hell, practically anywhere in the world.

Our professions are the most suitable for the internet - no surprise, as we are the ones that built it.

That might not seem enough, a mere $15, however there is no limit as to how many projects you can take on or at the same time how many hourly paid jobs you can manage - handle 3 simultaneous work, get $45 in total - no contractor will object to you as long as you handle their work fittingly. That is something you cant do while working on-site : work on someone elses stuff for an hour, get busted, youre in trouble.

I understand that many have families and people to support, and quite a many have become accustomed to rather high living standards.

So what ? if we lower our standards a bit in such times, we can work anywhere, anytime.

And note that, not having a profession that is required to be registered, unionized, guildized etc nowhere in the world, makes us capable of working ANYWHERE.

Too high taxes in u.s. ? Move to some other country where you are allowed to live in, just start working there. Its that simple.

On top of that, many countries will be pleased to have more it workers.

Unionization, regulation and etc are not to our advantage, but to our disadvantage. Keep in mind that organisations always fail to represent the masses they set out to represent - because only the rich, powerful & influential enough can spare enough resources to get on the helm of any of them. Then the result leads to manipulation and molding of the related masses to some other power's interest, and that generally becomes the industry bosses.

So far so good, were not mine workers, we can easily find ways to sustain ourselves, heck, even prosper (we are always free to use our skills to set up our own job, and we can do it with minimum capital) whenever we get laid off.

Maybe we are not that safe always, but, for the first time in the world history maybe, we have more freedom than any profession member had on the face of the world.

Re:we IT workers are the most advantageous

[cyber-vandal]

Unionization, regulation and etc are not to our advantage, but to our disadvantage.

A quick look at the history of the 20th century as compared to the the rest of human history would instantaneously prove you wrong. The 20th century saw the most regulation and unionisation in human history. It also saw the greatest period of social and technological growth the human race has ever seen.

Too high taxes in u.s. ? Move to some other country where you are allowed to live in, just start working there. Its that simple.

That may be possible for a multi-lingual 25 year old with no family or friends. How about the other 99% of the population? I've lived in 3 other countries apart from the UK and I'm telling you right now, it's not "simple" at all, and I didn't have a wife and children to relocate as well.

May I suggest a subscription to...

[linzeal]

Backwoods Country Magazine so you can learn to make it when they shut off your electricity and you are forced to use your 1/8th of an arable land that used to be your lawn to grow corn on and hunt neighborhood cats.

"Be prepared."

[Deagol]

I live in Utah, where long-term food storage is (to put it mildly) a big thing. I'm not LDS ("Mormon" to you unlearned gentiles), but my family has taken to putting away food as part of the rainy day fund. A couple of years ago, I took a year off. I cashed in the pre-tax retirement fund my employer was contributing to, and lived off of that (for the most part). It wasn't much -- about $30k after the 20% withholding, most of which was used to pay off a small loan (some remote land). My salary before my little sabbatical was about $53k/yr. The food storage we had on-hand helped to stretch the remaining $10k, which also had to pay for a mortgage and a hefty truck payment. Having a milk cow and chickens also helps the food go a long way, too. :) Had I not had the truck to pay for, we could have easily coasted along for 2 to 3 years.

While one can't go wrong with having money in the bank (or a fund) earning interest, my family's philosophy is to reduce monetary need first then put money away. I recently downgraded my job from $45k/yr to ~$17k/yr, and our standard of living hasn't suffered.

One poster on this thread has mentioned she doesn't wish to "risk" being forced into a "frugal" lifestyle. Our take on things is live frugally by default and you live with much worry in the long run.

Re:"Be prepared."

[maxume]

You misunderstood that other post. She doesn't want to have to lower her standard of living because of a job loss and plans accordingly. That's not any different than what you are talking about.

A few key things

[roc_machine]

- Keep my resume up-to-date. Most resumes you do will be custom tailored for a potential employer, but keep a generic one on hand and update it.
- Know what's going on in the job market. For me, that includes jobs in my hometown and network management (netcool, concord, cisco, etc) jobs anywhere in North America.
- Apply for jobs even if you think that it may not be a good fit for you. At least it provides good experience in writing a resume and cover letter, and possibly interview experience as well.
- Keep a minimum balance in a bank account, say $7000. These are emergency funds, and I think being laid off counts.
- If your company has a share ownership plan, get out if it, or at least make routine transfers out to another account. If the company is considering layoffs, there is a good chance they are not performing well, and that includes stock price. The last thing you want is to be hit with a double whammy of being unemployed and seeing your retirement income evaporate.
- Whatever training you can get at your current job, take it.
- Lastly, try and stay positive. Enjoy life to the fullest outside of work.

Over here, it's mandatory

[Opportunist]

In theory, I could rely on the system. When I get laid off, my employer has to give me one month of payment to get rid of me, and I am entitled to 80% of my wage for 6 months.

Usually, plenty of time to find a new job.

Retirement is taken care of, too, so that's, at least in theory, no issue either.

Still, I try to spend no more than 1/2 of my income. Being able to rely on the system is nice. It gives you a sense of security. Not relying on it gives you a feeling of independence, though.

Never take vacation

[Ratbert42]

At my old company, nobody ever used vacation time until they were forced to. Since the company would pay it out if you were laid off, it was the only severance package most people had.

Here is another perspective

[earthforce_1]

There was a time when I put tried to save every cent I could - pay down the mortgage, maximize my retirement savings, etc. So what happened? An expensive divorce from a rather greedy ex-wife and most of my savings were depleted. (I was within 2 years of being completely mortgage free at the time) Now I take a more fatalistic attitute - work hard, but live more for today and try to let tomorrow take care of itself, because I may not be around to see it. (I am a type 1 diabetic, which cuts my life expectancy by an average of 15 years anyway) If you die with a million dollars in the bank, you don't get to spend it in the afterlife.

That's hardly off topic

[Travoltus]

Who gave the Libertarians all the MOD points?

Hell, I've got mucho karma, so I can afford to tell it like it is. :)

The whole reason people have to save up so much money is exactly because of what cubicledrone said.

And to the idiot who said all cubicledrone wants is a Government guaranteed job, that's horse shit. I'm a Reagan Republican, I believe a man should work not live on welfare. You Johnny come lately laissez-faire rabid dogs that call yourselves Republicans today, want to snatch every job known to man away from the hard working AMERICANS who made this world great and whose fathers fought and died to keep the free market alive in the face of the Communist threat.

The evil empire after WW-II was communism. Now the evil empire is rampant corporatism that has fraudulently masked itself as 'capitalism'. It's nothing more than robber baronism and the world owes me profits but I don't owe anyone anything-ism.

I'm sick and tired of you irresponsible "greed is good, social responsibility is communism" anti social hermits living nice and safe and comfortable in your mommy's basement posting these bogus Slashdot armchair cowboy stories about how you save 2/3 of your income to prepare for layoffs. That's hog wash and most of us readers know it.

What some readers do not know is if most of us saved the way the author of this story saves, there is an economic consequence to this that is very well demonstrated in economics and is a mathematical certainty. Saving a huge portion of your money means, typically, you're putting it in a bank. That means you're not buying anything. That means businesses are making less money because of lower sales. Your bank is investing that money overseas, no longer investing in the US, but even if they were investing in a US company, you aren't buying anything from that company so their sales are going down. When millions of Americans are saving for a rainy day, that means the company inevitably feels the loss in sales tangibly, and that means they will start closing stores and laying off. That is a mathematical certainty in economics. Again, what bank is going to take your savings and invest in them when their market is shrinking and consumers are saving and not buying?

Such large numbers of people saving for a rainy day will create a mathematically certain problem - businesses will close due to depressed consumer spending. (Consumer spending is over 60% of the economy's vitality, folks.)

This is not exactly like people stuffing money into their mattresses in the Great Depression, but the effect will still be the same: consumers save like mad, businesses close due to the inevitable collapse in spending, more jobs are lost, more people stop spending, and a death spiral occurs. A depression is then very hard to avoid.

What America needs is a lot of increased savings, but what we REALLY need the most is to grow our way out of this mess. We need more jobs, and higher paying jobs, and more stable job security for people with children to look after. No, you free market drones living in your mommy's basement, chasing the moving cheese is NOT good for a person with a family. It results in kids having to move away from their friends, and a gypsy lifestyle that no street grunt or child psychologist alike will ever say is a good thing. You may think job security is evil but that just tells me you do not have children whose constantly changing needs forces you to need a job that is always there so you can concentrate on being a good parent and not have to go to your do-it-yourself 'extreme skills upgrade 101' class every night. Ever wonder why all those punk assed rich kids out there are doing drugs and getting themselves into trouble (often at the expense of others)? It's because of their absent parents that are living the dream world you anti job stability people envision: working constantly and paying more attention to their job competitiveness than to their kids. Go ahead and argue with me about it - I just hope you don't run into one of these people's neglected brats and learn the hard way what I'm telling you now.

Been there, done that

[rlp]

I learned a few things from my last lay off. I was out of work for about six months. Fortunately I had savings to get through it. Always keep at least six months of savings available. I had a lot of stock in the company that layed me off. The layoff was a mass layoff due to the company experiencing financial problems. Needless to say, the value of the stock had dropped considerably. The stock options I'd been 'saving' were worthless. Lesson two - don't invest heavily in your employer, and cash in any options as soon as they vest.

When you're unemployed, you need to lower your (cash) burn rate. We reduced unnecessary car trips, eating at restaurants, and most entertainment. We also shopped for food bargains and used coupons. We had several services we subscribed to on a monthly basis. Only those that were absolutely neccessary stayed. We kept internet access, as that was needed for my job search.

We substituted free entertainment for the movies, trips, etc. That included bicycling, local parks, and books and DVD's from the library. One unpleasant surprise expense was health insurance. Companies are required to offer COBRA coverage (i.e. you get company health insurance for 18 months, but your pay. They set the price). Family coverage cost $900 per month! Had I continued to be unemployed, we would have had to switch to a (non-employer) cheaper 'hospital only' plan.

I'm working now (ironically at the place that layed me off). My wife has re-trained (outside of IT) to provide some employment diversification. My daughter has changed her career objectives to avoid IT.

If you're in IT, accumulate sufficient savings, prepare a contingency plan, keep your resume up to date, monitor your cash burn rate. Don't over-invest in your company's stock. Don't live beyond your means, or paycheck to paycheck. If you're thinking about entering the IT field - don't do it.

Re:prioritize-future proofing

[tengwar]

I'm sorry, but I can't take this as a serious answer to the problem of being laid off, because your preparations cost too much and restrict your options and your mobility. You're taking savings (flexible) and converting them to single-purpose items that you probably won't use, and you're nailing your feet to the floor with non-portable assets

• Backup solar power? Mains power is cheap. Keep the money in the bank, spend it on mains if you have to.
• Food stores? Really bad idea if all you're worried about is being laid off. If you've kept the money as savings, you can buy the food when you need it. If you buy food now, it's a wasting asset (i.e. its value declines because some of it goes off).
• Pay off the house? No, keep a substantial chunk of the money on deposit where you can get at it for emergencies, and only after that pay off more than you have to on the house. You may get a lower interest on deposit than you're paying on the mortgage, but if you're looking for work, you are likely to need cash.

This sort of advice is only useful if you think that the whole of civilisation is going to collapse. As a preparation for personal financial problems, it's foolish.

Re:If you're self-employed, you're not laid off.

[hazem]

I had an engineering professor who once said that engineering was making decisions without all the information. If you have all the information then you're just doing technician work.

Saving/Investing is, in that sense, a bit like engineering. You do your best to make a good decision with incomplete information. There's no way to know what will happen in the future, so you make the best decisions you can and try to recognize the various risks and account for them somehow.

Another quote I like: Making predictions is a tricky business, especially when they're concerning the future.

Keep your skills up-to-date

[GWBasic]

The best thing you can do is keep your skills up-to-date.

It also doesn't hurt to have a hobby that you can turn into a job. An old manager of mine used to do woodworking as a hobby. When he got laid off from a 200k/year job, he decided to retire from tech and be a professional woodworker. Needless to say, he's quite happy.