With a recession on the horizon, that anxious voice in the minds of American workers is getting louder — am I going to lose my job?
Fears of an economic downturn are becoming more widespread as the Federal Reserve hikes interest rates to combat the highest inflation in decades, with economists saying the probability of a downturn over the next 12 months is nearing 50%.
So far, the labor market is still strong overall. But the number of firms announcing cuts is adding up: Robinhood Markets on Tuesday became the latest, saying it's slashing almost a quarter of its workforce, while Microsoft, Tesla, Netflix and Ford Motor are among companies laying off workers or planning job cuts. Amazon is relying on attrition to winnow its staff, and Google, Goldman Sachs and Apple plan to slow hiring for the rest of the year.
For worried workers already facing higher costs for rent and everyday expenses, the prospect of job loss can feel like a dark cloud in an already stormy time.
"It's natural to be worried, but it's important to have a strategy and a plan," said Noah Damsky, a financial planner at Marina Wealth Advisors. "If you don't have a strategy, use this as a time to figure it out."
Here's what experts recommend:
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Assess the Risk
Each industry will be affected differently by a recession, so you need to estimate how likely it is that your role might be eliminated, said Marc Lescarret, founder of Marc Alan Wealth Management in New Jersey.
He uses bond-like ratings to characterize the safety of different jobs. A university professor with tenure would get a triple-A rating, while someone working at a tech startup might get a junk rating. "You get paid a lot now, but it's risky," he said.
It's also important to consider factors like your seniority and the necessity of your role, according to Jay Zigmont, founder of financial advisory service Live, Learn, Plan in Mississippi. Jobs that could be outsourced or automated are more likely to get cut first.
Once you determine the risk level, you can decide how much in emergency savings you need. Most advisors suggest three to six months of living expenses, but saving 12 months worth can be smart for those with more risk.
Also consider how long it might take you to find a new role in your field and factor that into your savings target.
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Shape Up Your Finances
Along with boosting your cash reserves, advisors recommend an overall financial health check-up.
Damsky suggests taking a closer look at how much money you take in each month, compared with how much you're spending and where cuts can be made.
"If you can't afford a gap in cash flow, then knowing, 'Okay, I can do DoorDash deliveries or walk dogs in the neighborhood' can help," he said.
Make sure to pay down high-interest debt if possible. Rates for credit cards are ticking higher, with the average at 17.35%, according to Bankrate.
It's also worth knowing what other options you have for a worst-case scenario. Kyle Newell, owner of Newell Wealth Management in Orlando, recommends checking if you're eligible for a home equity line of credit.
Alex Rezzo, founder of Andante Financial, advises taking stock of your investments and which could be drawn down if needed. Taking money from investment accounts with unrealized capital losses can give you a tax advantage at the end of the year. Meanwhile, removing cash from 401(k) accounts should be avoided.
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Tend To Your Health
Depending on the likelihood of a job cut, experts recommend getting up to date on any medical checkups, in case you lose health insurance.
Programs like Cobra can bridge the gap in insurance if you do face a layoff, but getting those appointments in can help relieve anxiety, said David Huebner, financial advisor at Huebner Financial Planning.
If you have a spouse or partner, consider if you could join their health insurance plan and how that would work.
And for those with flexible spending accounts, make sure to use that money sooner rather than later, in case you can't get it back after a layoff, Huebner said.
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Network, Network, Network
Having solid relationships with those in your industry is always important, but especially if you need a new job.
"Most job applications are read by computers, so it's more about having the people in your field that you can reach out to," Zigmont said.
The classic advice is to get coffee or drinks with others in your industry to maintain relationships, but don't forget about those who had lower positions than you, or people that you supervised. They might have insight into hiring trends at their companies.
Along with updating your resume, make sure your LinkedIn page is current as well, since that's often used by recruiters.
One last thing to ask yourself — would a layoff really be that bad?
For many, of course, it would be devastating. But some might use it as a chance to make a career change, take a sabbatical or retire, said Spenser Liszt, financial planner at Paradigm Advisors.
"Losing your job may be a blessing in disguise," he said. "Take the time now to think about what you want your ideal life to look like."
