The funny thing about job security is that everyone thinks they have it until they don’t. Most of us can’t imagine a scenario where we’ll get laid off until something unexpected sneaks up on us.
In 1993-94, Alberta Premier Ralph Klein set out to eliminate a provincial debt of $23 billion. I was only 14 and too young to understand the impact of Klein’s budget cuts.
After a decade of pain, closing schools and hospitals and laying off thousands of public sector workers, the debt was finally paid off in 2004.
Alberta Budget 2013
Fast forward 10 years later and Alberta is back in debt and faced with similar financial challenges.
The latest provincial budget was released last week and, as a University employee, I was particularly interested in the funding announcement for post-secondary schools.
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Premier Redford had made it clear that post-secondary institutions could count on a 2% increase in their operating grants for the next three years. That was before the province discovered they’d be short $6 billion in revenue this year.
Now all bets were off. Universities scrambled to make plans for a worst-case budget scenario, a 2% decrease in funding.
It turned out to be a nightmare scenario. Funding was cut by $147 million – or 7.3%. This is going to be ugly.
Expect the unexpected
Job security is no guarantee these days. That’s why it’s important to stress test your finances against the worst case scenarios, and then test them even further against a nightmare scenario. You never know what might happen.
While you may never be completely prepared for a layoff or other financial disaster, there are certain things you can do to mitigate the risk.
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I’ve built in a few financial cushions to help ease the fall if things go bad.
Cash reserve – Call it an emergency fund or an opportunity fund, it doesn’t matter. What matters is you have access to a cash reserve that can help you through a period of unemployment. I’ve got $15,000 in a high interest savings account with ING Direct.
Extra mortgage payments – I’m not a fan of taking a mortgage payment vacation, but I’m putting an extra $1,100 per month on top of my regular mortgage payment. If we were faced with a financial challenge I would suspend the extra mortgage payments and add that back to my monthly cash flow.
Saving and Investing – It would be great to be able to live off my investments but unfortunately my portfolio is only churning out a few thousand in dividends per year. I’d put an end to my RRSP and TFSA contributions if I were laid off. I’d also stop adding to my cash reserve. That would free up $2,500 per month.
Side Income – Blogging started out as a fun hobby but it’s also been a good source of secondary income. If I were to get laid off my full time job I would look to expand my online business by increasing the content on Boomer & Echo and picking up another freelance writing gig.
Final Thoughts on Job Security
It’s not pleasant to think about layoffs and worst case financial scenarios.
Most of us like to believe we’re good at our jobs and that we provide enough value to our employers that they’d never consider letting us go.
Sadly, that’s not always the case, especially in the face of sweeping budgetary cuts like those just announced by the Alberta government.
I’ve got a good financial cushion in place so that, if I do lose my job, I can take the time to find the right opportunity and not be forced to accept the first job that comes along.
How confident are you in your job security?