Gail Q&A - Answered!

So, back in March I wrote to Gail Vaz Oxlade about preparing for possible lay offs/recession. She had sent me an e-mail response within a few days, but didn't post the question on her website! Well, it would appear that she has soooo many questions in backlog as she just today posted my question and answer.

I thought I would share below:

Q & A

Hello Gail,

I am sure that you are currently being bombarded with questions about the recession and preparing for lay offs. That said, I haven't seen a question or a post about it, so I thought I would throw this out there.

The company I work with is touting the line about how this recession is actually an opportunity to refocus efforts... yadda yadda yadda and that because we are a private company we are safer than some of our competition. While that might be true, they are slowly but surely going division by division and group by group assessing business need and letting people go.

I do have a budget which I am pretty good at sticking to which includes an emergency fund (building slowly at about $600 right now), and a debt repayment plan (owe about 2500 on my visa and have 10,000 plus in student loans), as well as long term savings (RRSP).

So for the person(s) who have things on the right path, but just aren't there yet in terms of preparedness (3-6 months of savings and zero debt would be my goal). What should we do to prepare for a possible lay off, reduction in pay, or reduction in hours.

I have read in some newspapers and other sources, that while employed, people should seek out a line of credit. Is this something you would advise? It doesn't seem right to me to seek out credit when that is what got us in this mess in the first place.

Thank you for your sound and quality advice,

Jessie

Jessie, the line of credit is BAD advice. Let's say you decide to take out a $20,000 line of credit. You lose your job, exhaust your emergency fund and savings, and tap the line. Your bare-bones budget is $2,000 a month. You're out of work for five months. When you finally get a job, you're relieved, only to find you're now $10,000 in debt!

If you think there may be the likelihood that you'll lose your job (which, by the way, there ALWAYS is), then you should brush off your resume, and start looking at what other opportunities may exist. You might look at ways to work part-time to supplement your full-time income and build up your emergency fund faster. Or you might look at skills or talents you have that you can turn into a small biz... every penny counts.

Good luck. This is a tough time for lots of folks, and I suspect it'll get tougher before it gets better. g