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Topsy-Turvy Times for Income and Jobs
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Finance

Topsy-Turvy Times for Income and Jobs

By Deborah Nayrocker
Guest Writer

CBN.comWe are beginning to see signs that the recession is winding down. There are a few bright spots in the economic outlook. Yet many Americans want more evidence of an economic recovery. The unemployment rate is at 10.2 percent, close to 16 million, the Labor Department states. People working part-time, wanting fulltime work is 17.5 percent.

PNC economist Stuart Hoffman says that the 10.2 rate “reinforces a view on Main Street that recovery is spelled j-o-b-s and not G-D-P.” Unemployment will likely peak in 2010, according to Federal Reserve Chairman Ben Bernanke. We know that job growth generally lags behind economic recovery.

Falling income

Thousands of employers are struggling to stay in business. With fewer customers and sales, employers are cutting expenses to help make ends meet. Some employees are working fewer hours or having reduced workweeks. Growing numbers of employees are agreeing to a wage or salary freeze.

The global outplacement firm Challenger, Gray & Christmas surveyed 100 human-resource professionals in a recent poll. Imposing pay cuts and capping wages has been rare up until this current recession. Yet a third of the companies recently surveyed said they were requiring a salary cut or freeze.

Employers have been looking for ways to cut costs. For example, USA Today is requiring unpaid furloughs for a large number of its employees. Saks is cutting merit raises and is no longer matching contributions to its 401(k) plan. Caterpillar says it is cutting executive compensation by up to half and not increasing wages for support staff and managers. FedEx is slashing senior executive pay and suspending 401(k) contributions, according to Money and Markets.

This year consulting firm Watson Wyatt Worldwide Inc. polled 245 U.S. companies on how they’re weathering the recession. A majority, 65 percent, said they had cut jobs or were cutting jobs in the future. Some companies said they had mandatory furloughs (17 percent), and others offered voluntary furloughs (19 percent), according to The Wall Street Journal.

An increasing number of employers are experimenting with furloughs, hoping to avoid layoffs. With week-long furloughs, in many states hourly employees can keep benefits. Employers win by retaining productive and highly skilled workers, avoiding rehiring and retraining. By offering furloughs, employers also avoid paying severance costs.

Unemployment

With orders and company earnings disintegrating, firms have been cutting losses with layoffs. Unemployment has reached double digits, affecting more families than expected. Out-of-work people often find themselves questioning their worth and their future. This can be a traumatic and emotional time in their lives.

Job losses are taking place in many different sectors: manufacturing, financial, and services. Even state and local governments are cutting thousands of jobs to balance budgets. Jobs in education and nursing, traditionally filled by women, haven’t been affected as much as jobs in other sectors.

Some companies are hiring as they fire. Peter Cappelli of Wharton School, University of Pennsylvania, has been following this trend. He says that, “in past decades, many employers retrained and relocated underused workers. Now they’ve discovered that you can restructure even faster by laying off and hiring” (WSJ, 5/11/09). Among the companies firing and hiring are Boeing Co., Microsoft Corp., IBM Corp., AT&T Inc., Yahoo Inc., and Time Warner Inc. As shifts take place in industry, these employers are hiring for other needed work skills in other locations.

Retirees Affected by the Recession

Retirees have less income, with recent losses from stock funds. Many retirees are finding they can’t count on a steady stream of retirement income, as they had hoped. Some pension plans are not providing adequate income, as they assumed they would.

Interest income is shrinking. Stock market investors are finding they can’t always count on having stable yields. Stock dividend income is being delayed, reduced, or canceled. Stock losses have eaten into incomes, reports Money and Markets.

Be Proactive and Survive a Layoff

Many families say they are scaling back on spending as a result of less income and uncertainty about possible layoffs. Some are selling furniture and other items in yard sales or on the Internet. Financial planners suggest scaling back discretionary spending and adjusting to a simpler lifestyle.

Even if you haven’t lost your job, develop a plan for dealing with pay cuts or unemployment. Strategize ways to manage financially. By dealing with this immediately, financial stresses can be minimized. When you plan ahead, you won’t let fear and panic control your actions.

Along with developing a plan, it is important to grow your emergency fund savings. Aim for three to six months of living expenses. This is not an unrealistic time frame, since “more than one in every three unemployed workers has been out of work for six months or more, the highest proportion since World War II,” (November 2009WSJ).

If you do become unemployed, remain optimistic and flexible. Remember this: “God has said, ‘Never will I leave you; never will I forsake you’” (Hebrews 13:5).

Take these important steps:

1. Talk to your family about your job loss and inform them that expenses will temporarily need to be cut. Make a realistic new budget. Look at your spending. What are your needs? Real needs are food, clothing, and shelter. What are your wants? Figure out all the ways that you can cut back. Can you ride a bus, bike, or walk to get to your destination? Can certain food purchases be eliminated, especially those with no nutritional value (sodas, snacks)? What entertainment habits need to change to cut costs? Even if you have an emergency fund, you don’t know how long you’ll be unemployed. Once you make a budget, stick to it.

2. Collect all the credit cards from family members to stop credit card use. Avoid new debt. Resolve to use cash or debit cards instead.

3. Apply immediately for unemployment benefits. Find out how to file in your state at www.CareerOneStop.org.

4. Find another job as quickly as possible. Network with people you know and all the contacts you have. Don’t limit yourself to searching online. Find places and jobs where your expertise, work, and training can be valued. Take a fresh look at your skills. Prospective employers want to know what you did in your previous job, and what you are qualified to do for them.

Copyright 2009 Deborah Nayrocker. All rights reserved. Permission to reprint required.


Deborah NayrockerDeborah Nayrocker is an award-winning writer and personal finance columnist. She is the author of The Art of Debt-Free Living and a popular Bible study Living a Balanced Financial Life. Her Web site is www.artofdebt-freeliving.com.

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