5 Steps to Financially Prepare to Be Laid Off

It’s very possible, and some would argue very likely, that you could experience being laid off from your job at least once in your career. There really is no such thing as job security these days. Experiencing a layoff unexpectedly can trigger a range of emotions. The company you have devoted thousands of hours of your life to, away from your family and friends, abruptly informs that you and your services are no longer needed. Betrayal, frustration, anger, sadness, anxiety, and embarrassment are just a few of those emotions. It doesn’t have to be that way though! If you are financially and emotionally prepared for a layoff, it can be an empowering experience.

1.    Your Employer is Just Not That Into You

Unless you’re in a union, have a written employment contract or live in Montana, employees of private companies are likely subject to at-will employment. Three-quarters of American workers are subject to at-will employment. Let’s understand what that means:
At-will means that an employer can terminate an employee at any time for any reason, except an illegal one, or for no reason without incurring legal liability.
Again, there is no such thing as job security! With a few protected exceptions, (e.g. based on race, sex, gender, national origin, age, disability), a company can terminate your employment at any time for any reason, or for no reason at all. Many of us don’t realize this simple fact and base our livelihoods around our employer. Where we live, what time we wake up, what time we sleep, when and where we vacation. Most of our lives are centered around our employer and that connection can be ripped away for any reason or no reason at all.
This is not to bash corporations, but rather simply to put into context that many of us are centering our lives around a relationship that has little to no contractual stability. In other words, you are not married to your employer, you’re just dating.
Corporations, especially publicly traded companies, have one primary goal – Increase shareholder profit. Regardless of what it says on your employers’ ‘About Us’ page, everything your company does centers upon that one primary goal. Corporations are like animals in the wild. That animal may look cute and cuddly, but the second it even perceives a threat to its survival, it is deadly. If company leadership decides that it needs to remove 10% of its workforce to be more competitive, it is their fiduciary duty to do so. It’s not even about you. They are just not that into you.

2. You are the CEO of [YOU], Inc.

Once you understand that you are not wed to your employer, the next step is to understand that you yourself are a corporation. The employment contract has changed dramatically from the days of our parents and grandparents, pensions have all but vanished, unions have diminished. You are solely responsible for your financial well-being, that includes preparing for layoffs and managing your own retirement. Once you begin to see yourself as a business, ask yourself a simple question: Can you think of any successful businesses that only have one client/product? Probably not, because if that one client leaves or the product stops selling, they would be out of business. Well, if you are an employee and your employer is your sole source of income, that’s exactly what you are doing.

3. Build an Emergency Fund

Once you get your head around the fact that you are not wed to your employer and you are actually a business, a world of opportunities can open up to you. By no means are we advocating quitting your job, but once you see your employer as one client and one revenue stream, you can start to focus on other things.
You have to build an emergency fund. No excuses, it’s vital. Three to six months of your essential monthly expenses (in cash in a separate bank account) is a great goal and gives you the peace of mind that you can pay your bills if your employer breaks up with you suddenly.

4. Evaluate Your Skills In the Marketplace

If your employer is your primary client, can you use that same skill set for other clients? If you do social media marketing for your employer, can you do social media marketing for other companies in other industries? You may also have skills that are completely outside of what you do from 9-5 that you can think about monetizing. One way to evaluate this is to ask yourself three questions:

  1. What do people come to me for advice for personally and professionally?
  2. What problems do I want to solve?
  3. What value do I bring to the marketplace that people are willing to pay for?

Since you are a business, you must think about solving problems for others and providing value to the most amount of people. Once you start thinking this way, the gears will start to turn and you can develop side hustles and other sources of income outside of your employer.

5. Let Your Employer Help You

Finally, utilize your employers’ resources. You may just be dating your employer, but there are advantages to dating wealthy. Here are a few suggestions on how to make sure you’re getting the most from your relationship with your employer.

  1. Maximize Your Employment Benefits – don’t leave money on the table because you haven’t looked at the HR Portal in a while
  2. Take Employee Development seriously – You must continuously learn and grow to make yourself (and your business) more marketable. If your employer (primary client) is willing to pay for you to develop new skills, that can be valuable in your current role, future roles and for other clients.
  3. Build Your Clientele – Now that you know that you’re just dating, give yourself permission to see other people. Network within your company, your company’s business partners, and competitors. There are people within all three of those groups that can be future employers and/or future clients.
  4. Check Your Value in the Marketplace – Employers have a financial incentive to pay you less than market value, especially over time. Remember, their #1 goal is to increase shareholder value and your salary may be in direct conflict with that goal. You are solely responsible for ensuring you are getting paid market value, no one else. Every 3-5 years, you should be testing that value in the marketplace by applying for jobs. Not only is applying for jobs good for networking and building clientele, but it also helps keep you from being severely underpaid, costing you tens of thousands of dollars in the long run.

Thirty-year employees are increasingly rare each day. You most likely will not work for the same employer for your entire career. Understanding the true nature of your relationship with your employer and your responsibility to your own financial well-being is vital. If you understand your value in the economic marketplace and maximize that value not just for your current employer, but also for [YOU], Inc., getting laid off can be an opportunity, not a catastrophe.

Baby on the Way! Financially Preparing for Maternity Leave

Thinking about having a child? Or maybe you’ve recently found out you’re pregnant! A range of emotions hit you – excitement, bewilderment, surprise, and anxiety – but after some time, your rational mind kicks in and asks,

“Wait, can I even afford to have a child?”

“How much should I save?”

“Does my job even have paid maternity leave?”

These are the questions my wife and I had when we first started to think about having our first child. There’s so much involved with bringing new life into the world, we really didn’t want to add financial stress to the list.

We knew we would have to rip off the band-aid and talk honestly about what would be ahead. So first, we did some research and we came across some disheartening news.

  1. According to a newly released US Department of Agriculture study, the average cost of raising a child from birth through age 17 is $233,610 for a middle-income married family with two children. (not including college or vacations).The average middle-income family will spend $12,680 on child-related expenses in their baby’s first year of life.
  2. According to Pew Research, The U.S. is the only industrialized nation in the world that does not mandate paid leave for new parents.
  3. Family Medical Leave Act (FMLA) requires certain companies to offer 12 weeks unpaid leave. However, the vast majority of families cannot afford to go without a paycheck for three months, so many are forced back to work much sooner.

Pretty bad, right? The good news is that despite the costs and unfavorable policies, there are millions of American families raising happy, healthy children.

Below, my wife and I came up with the most important things to do and not do to financially prepare for maternity leave. We also created a FREE financial checklist, Baby on the Way! which covers many of these items below and more with additional resources. Fill in the information below to receive an email copy. 

1. DO: Check with your employer(s) for their maternity and paternity leave policies.

You’ll want to check with your human resources department to understand what their policies are and how they’ll apply to you. Maternity leave is actually considered to be a short-term disability, so you will want to understand whether you have or are eligible for short-term disability coverage, how long it lasts, and how much of your paycheck it will pay out (typically 50-60%). My wife was only eligible for short-term disability after being at her job for a full year.  We started trying once we knew she would be eligible.

You’ll also want to understand if any of your benefits will be impacted while you’re out. Accrued vacation? Sick days? Bonus? Health insurance? Life insurance? 

2. DO: Evaluate your health insurance coverage and check with your health insurance provider about maternity benefits they offer.

Along with speaking to your HR rep, also check with your health insurance provider. Many insurers offer benefits to assist you during pregnancy and post childbirth process, which can save you time and money. Benefits such as consultations, educational courses, breast pumps, and lactation consultants are just a few examples. The lactation consultant that my wife used two weeks after birth was as she claims, “A life saver”.

Also, make sure all healthcare providers are in-network. For example, make sure your obstetrician and their attending hospitals are in-network. There is nothing worse than getting a $2000 bill for your hospital stay that also comes home with you.

3. DO: Have a written monthly budget

Whether you have had a written budget before or not, it’s time to buckle down and write and stick to a monthly budget.

First, you’ll want to save as much as you can to prepare for a potential loss of income during pregnancy. You can start by cutting out non-essential spending to reallocate those dollars toward savings. Cutting cable, cooking at home, and reviewing monthly memberships is a good start. As a personal finance nerd, I was able to convince my wife to set up a baby fund before we started trying. It certainly came in handy when we discovered how expensive daycares were in our area.

Second, you can’t change what you don’t measure. You’ll likely have to reprioritize certain aspects of your finances. For example, if you were making additional payments on your student loans to pay them off quicker, you may want to reallocate that money towards an emergency fund or a separate baby savings fund.

Third, you want to have a pre-delivery and post-delivery budget to understand how your resources will be allocated before and after pregnancy. Particularly if your income will be impacted by short-term disability. What will it look like to live on 60% or less of your salary for a few months?

4. DON’T: Assume you can work up until pregnancy

Pregnancy can be quite unpredictable, so make sure you have flexibility in terms of your planning. You may be planning to work until your due date, but your little bundle of joy might have other plans! Understanding the financial implications of leaving work earlier will curb any additional anxieties if the situation arises.

5. DON’T: Go it alone. Lean on Your Village

Finally, and most importantly, you are not alone. Often times we have trouble asking for help, but this is an undertaking that is beyond one individual. The African proverb, “It takes a village to raise a child.” is so accurate. You’ll need to lean on others during this process. Often times we forget, the vast majority of the time, people are ecstatic to help us. Put yourself in their shoes. If you had a pregnant friend or family member ask you to give them a ride to a doctor’s appointment, how would you feel? Likely, you would be happy to help!

Financially speaking, baby showers are a great way for the ‘village’ to help you get what you need to prepare for the child’s arrival, but be sure to focus your baby registry on needs, not wants. Also, barring safety concerns with items such as cribs and car seats, second-hand items are a great way to save money.

For those in your village that may not be able to afford more expensive items on a baby registry, diapers, baby clothes, home-cooked meals, and babysitting are great low-cost substitutes. Allowing people to help and contribute, brings them joy and gives them a stake in the process and takes some financial burden off of you.  Find out who in your village has had a child three to six months ahead of you — they may be looking for someone to unload all of their baby clothes that no longer fit!

Again, millions of people have gone through this process and came out the other side and many of them have less financial resources. The best thing to do is to plan ahead and get organized. We wish you good luck!

For more additional tips and resources, be sure to fill in the information below to email a copy of our FREE Baby on the Way! Checklist.

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3 Ways to Increase Your Compensation Without Talking to Your Boss

Not everyone gets salary increases every year, but that doesn’t mean you can’t increase your total compensation. Most of the focus on compensation is on salary, but your employee benefits can account for as much as 30% of your total compensation.

Remember when you started at your company and in your orientation, you had a meeting with HR to discuss your benefits? They likely gave you a thick folder of information and depending on how long you’ve been with your employer, you may not remember a single thing from that meeting, but that folder is likely buried at the bottom of your desk drawer. You may not realize in the fine print of those handouts are some really important benefits that can either put money back in your pocket or improve your overall financial standing. If you want to increase your compensation without having to talk your boss, it’s time dust off that folder and/or set up a meeting with HR. 

We’ve created a detailed FREE guide to maximizing your employee benefits, which explains common employee benefits in plain English, but here are three of the most unused benefits which cost can cost us thousands of dollars each year.

1. 401(k) and Employee Matching

If your employer matches your 401(k) up to a certain percent, you are actually turning down free money if you don’t take full advantage of it. Let’s give an example of how this works:

Example: John Doe makes $50K in salary. His employer matches his 401k at 5%. So if he invest 5% ($50K * 5% = $2,500), his company will match that investment up to $2,500. If he invests less, the company will match less.

So in that example, if John decides not to invest in his company’s 401(k), he just reduced his total compensation by the $2,500 match each year.

We recommend building a base emergency fund prior to long-term investing, but it is important to take advantage of your company match as soon as possible.

2. Wellness Programs

If you have health insurance through your employer individually or your family, your employer likely pays 70-80% of your health insurance premium. The portion that comes out of your paycheck is closer to 20-30% of the total cost. This is important because that means your employer is financially incentivized to have a healthier workforce. Healthier employees equal lower insurance premiums for the company. In order to accomplish this, employers have created incentives to get you healthier and many of these can take the form of financial incentives.  Examples include discounts or reimbursements for gym memberships, discounts on home fitness equipment, healthcare reimbursements, cash rewards, weight loss programs, smoking cessation programs. Think about it this way, your employer is willing to pay you more money to be healthy.

3. Corporate Discounts/Partnerships

Most people are familiar with receiving employee discounts if they purchase products or services from their employers. However, employees are less familiar with discounts they may receive from other companies because of their employer. Particularly with larger companies, they often have sizable contracts with different vendors and often as part of that contract, they will offer discounts to their client’s employees as well. So you may able to receive a 20% discount on your monthly cell phone or cable bill because your employer has a contract with Verizon. It’s not solely cell phone or cable bills either, this may include electronics, rental cars or even group insurance policies such as auto, home, and life insurance. Also, employers sometimes have internal online portals where you can purchase products with the discounts built-in instead of purchasing in-store or from the company websites directly.

Saving money on your expenses, particularly fixed monthly bills, is not much different than increasing your salary. Instead of increasing the income bucket, you reduce the expense bucket. The result is the same, more money in your pocket. So whether it’s retirement, wellness programs or corporate discounts, make sure you dust off that HR packet in your desk drawer or give a call to HR to learn more about your benefits and how you can increase your total compensation.

For more detailed information on maximizing employee benefits, check out our FREE 15-page guide including details on Retirement, Health, Life, Disability benefits and more, which we call Give Yourself A Raise!

7 Do’s and Don’ts of Managing Your Finances

Money management can be difficult. There are lots of opinions on how to manage your money successfully, but sifting through all that can be a challenge. We have boiled down our 7 top recommendations for managing your finances.

1. Do: Plan Your Spending Before the Money Arrives

You are the CEO and CFO of You, Inc. Think about running your personal finances like a business. Companies plan their revenues and expenses well in advance. Budgeting gets a bad rep, but successful, profitable businesses formally plan their finances and make decisions in advance of their spending.

Money is like a toddler. If you don’t monitor it carefully, it will wander off and disappear quickly!

2. Do: Aggregate Your Accounts and Track Your Spending

Aggregating your accounts, allows you to see the big picture and a number we highly recommend you track regularly – your net worth. It can be difficult to make tough choices if you don’t have the bigger picture in mind. Tracking is also important. You cannot change what you do not measure. In order to make meaningful change, know exactly how much you spent last month versus the month prior. Guessing doesn’t work well with personal finances. Once you build a habit of tracking your finances, making smart decisions about your money becomes much easier.

3. Do: Understand and Deal with Your Impulse Purchases.

For some it’s the mall, for others it may be online shopping. Have you ever gone into a store planning to spend $50 and come out spending $300? Evaluate how and why that happened. Keep in mind; it is a marketer’s job to turn a “want” into a “need.” Notice on television commercials, often the product or company isn’t revealed until the very end of the commercial. Instead of selling a can of soda, they are selling happiness. Instead of a gym shoe, they are selling peak athletic performance. Instead of selling their own product, they may have a celebrity endorse it as if it is heaven-sent. Companies hire social scientists who study how to influence human behavior, emotions and decision-making to get an edge in selling their products and services. Here are some examples to protect yourself and your wallet:

  1. 24-hour rule – Wait at least 24 hours before making purchases over a certain amount
  2. Do not go grocery shopping on an empty stomach
  3. Deconstruct advertisements: what are they really selling?
  4. Use cash for non-regular expenses
  5. Don’t fall for terrible excuses (“I deserve it”, “it’s on sale”, “I’ll pay it off next month”)

4. Do: Develop a Habit of Saving and Automate It.

Even if you start small (i.e. $25/week), put systems in place that force you to save. The government understands this very well, which is why employee payroll taxes come out of your paycheck even before you are able to touch it. Apply the same strategy for your savings. Some employers will allow splitting your paycheck to different bank accounts (i.e. 75% checking, 25% savings). Another idea is to set a recurring transfer from your checking account to your savings on the same schedule as your paycheck. There are other automatic features to consider such as:

  1. Auto escalating your 401k contributions – some employers with a 401(k) offer an option to automatically increase your retirement savings by a certain percentage on a regular basis (i.e. increase 1% annually)
  2. Keep the change features in checking accounts – Some checking accounts will round up your purchases and put the change in your savings account. It is the e-version of the piggy bank. If you purchase an item for $5.60, it will round up to $6.00 and $0.40 will be deposited in your linked savings account.

5. Don’t: Ignore Your Credit Score and Credit Report

A credit score is very important to be aware of and to know how to improve. Credit scores have traditionally been used to evaluate credit-worthiness for extending loans (e.g. personal loans, mortgage, car loans, credit cards) and the higher the credit score, the more financially credit-worthy one is. The reality now is that both credit scores and credit reports are being used beyond financial transactions. Credit scores and reports are being used for employment decisions, housing, insurance premiums, and even utilities such as cell phones and cable. The challenge is credit reports often have mistakes which can negatively impact your credit. Check out our Resources Page for resources on checking both your credit report and credit score.

6. Don’t: Ignore Your Workplace Benefits

If you work for a company and do not understand the full scope of your employee benefits, it may be time to check out your HR Benefits website or set up a meeting. Particularly with larger companies, there are often benefits that go underutilized that can save you hundreds if not thousands annually. One of the largest ones is the 401k match. For most people, this is a no-brainer to at least invest as much to maximize the match as it is a 100% return on your investment. Wellness Initiatives can often mean big savings as well. Many companies are offering rebates on health insurance premiums for wellness activities, such as physicals or wearing fitness trackers. Let’s think about that for a second, companies are paying additional cash to employees to be healthier. There are several other types of benefits, and we’ve created a FREE Guide to help you maximize benefits that are offered to you.

7. Don’t: Keep up With the Joneses

Most people are familiar with the term ‘Keeping up with the Joneses,’ but just so we are all on the same page, it refers to making material comparisons to your social circle. The idea that if your neighbors or friends buy a new car, you should too. We call this the comparison trap and its one of the lessons we learned paying off our student loan debt. Part of the problem with comparing your financial status with others is that it is very difficult to know someone’s complete financial picture. Money is still a private topic and everyone has different income, expenses, debt obligations and assets. The people you are comparing yourself to could be completely up to their eyeballs in debt or fund their lifestyle through an inheritance. Making comparisons, not only could be comparing apples and oranges, but it also casts your own possessions in a negative light.

“Comparison is the thief of joy” – Mark Twain

A few reasons why keeping up with the Joneses is a bad idea:

  1. The Joneses are broke! According to a recent Bankrate survey, 76% of Americans are living paycheck to paycheck with little to no emergency savings. Why keep pace with people that are one emergency away from financial catastrophe?
  2. When you compare yourself to others, it’s much easier for wants to become needs. Wanting a car becomes needing a brand new SUV. Technology like smart phones, that didn’t exist 10 years ago, are a now a need. We have a desire to show off and have our success validated by others.
  3. Companies are spending billions of dollars to market their products and services to you. Many luxury brands are selling a temporary feeling of exclusivity in exchange for premium pricing. For example, a luxury shoe could be made in the same factory as an off brand shoe, but once they slap the logo on, they can charge five or ten times more. Luxury and quality are not the same. It is easy to get sucked into the consumerism culture. Happiness from possessions is always temporary and fleeting.

This leads us to the fundamental challenge of managing your finances. We live in a consumerism culture and an economy fueled by consumer spending. On one hand, we have many of the influences we described (social, corporate, psychological, economic) with a clear mission to separate you from your income. Those influences contend with our own goals to keep our income and grow it for the future. These recommendations will help you be better equipped to keep more of your income to reach your financial goals.