Lee-Anne Goodman

Wednesday, February 20, 2008

No one seems to want to say the “R” word out loud, but there are irrefutable signs that a recession may be looming. And that means even the happily employed should get ready.

The U.S. economy is slumping, and some believe a recession may be inevitable despite damage-control measures enacted by the Bush administration. If growth slows south of the border, that could sound the death knell for jobs in Canada, particularly in the manufacturing and export sectors.

Recessions bring down-sizing as corporations struggle to cut costs, and with down-sizing comes genuine anxiety about prolonged unemployment, a lack of future job prospects and a serious depletion of savings. Even though some Canadian economists remain cautiously optimistic that a recession in Canada will be gentle compared to the mayhem that could unfold in the United States, it’s never too early to start recession-proofing your finances and your career.

“Nobody has a crystal ball,” says Toronto financial planner Andrew Rickard. “If I could predict which way the markets or the economy was going, I wouldn’t be here, I’d be controlling the world from my island villa. But that doesn’t mean you shouldn’t start planning now. Don’t wait until there’s smoke pouring from both engines to strap on your parachute.”

It’s not as hopeless as you might assume, Rickard adds. A few simple and easy measures, taken before a possible recession hits, could make the difference between comfort and anguish during unemployment. It’s no fun scrimping for pennies as you search for a new job, he adds.

Some tips from Rickard:

Start saving now. Ease up on luxury spending, costly vacations, unnecessary big-ticket items, fancy new gadgets and appliances – now is not the time. Ideally, try to have an emergency savings fund equivalent to three or even six months worth of your after-tax earnings set aside.
Don’t even think about raiding your RRSPs to pay the bills. Your retirement savings are for just that, your retirement. They’re long-term investments, so let them do their job. If you cash them in while you’re out of work, especially during a recession when the markets are down anyway, you’ve not only crystallized your losses and triggered a tax bill, but that contribution room is also gone for good. You can’t put the money back in again when you’ve found another job. So don’t borrow from your old age to see you through the present.
Go back to school if you need to upgrade your skills. If you are accepted as a full time student at a university, college or other qualifying educational institution you can take $10,000 a year from your RRSPs (up to a lifetime maximum of $20,000) without penalty under the Lifelong Learning Plan. Your spouse or common-law partner can also participate, meaning one couple could withdraw up to $40,000. After you finish school, you have 10 years to pay the funds back into your RRSP.
No cash on hand? Start saving today by having money automatically transferred from your main chequing account and into a high-interest savings plan on the same day you get paid. Get it out of there so you’re not tempted to spend it. Ask your bank, or look on the Internet. There are lots of high-interest savings accounts available online from places like CitizensBank.ca, HSBCDirect or ING.
Get some credit. If you are concerned about losing your job and don’t think you will be able to accumulate adequate savings quickly, you may have to consider tapping into your home equity – either through a second mortgage or a line of credit – to see you through the rough spots. Don’t wait until you’re out of a job to talk to your banker about a loan. The best time to borrow money is when you don’t need it.
Once you’ve got your finances in order, Rickard says, start making yourself indispensable to your employer. If you’re the type who’s in your supervisor’s office every day to complain about co-workers, the office temperature or the food in the cafeteria, be aware that could be setting yourself up to be the first on the chopping block no matter how many on-the-job strengths you possess. The squeaky wheel doesn’t get the grease in times of recession – instead, it could simply earn itself top spot on any axe list being drawn up by already stressed-out managers.

Pull your weight – and then some. Happily take on extra work. Volunteer to work overtime, weekends and to take work home. Be positive; think of it as short-term pain for long-term gain. Companies remember the employees who made their lives easier during stressful times, and are less likely to lay off their stars in both the performance and attitude categories.
Figure out what challenges are facing your employer, and think of ways to come up with solutions. Come up with cost-cutting or revenue-generating ideas.
This is a tough one, and requires a more sacrificial bent than many of us might be able to stomach: offer to take a pay cut. Your employer won’t forget it, and will likely reward you once tough times have passed.

Get your resume updated long before the first hint of layoffs. Make sure it’s picture-perfect. And start looking around to see what’s out there. Talk to a head-hunter. Talk to people in your field about what companies are growing, not cutting. Talk to former colleagues, former bosses, about what’s going on in your industry and if there are any opportunities for you. If the time is right and you get some good leads about possible employment opportunities, consider making a move.

Lee-Anne Goodman

Source:
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