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Karen Telleen-Lawton: Lemonade From Job Loss

There’s nothing like the gut-sucking, brain-scrambling feeling of losing a job. Whether anticipated or not, it’s an upheaval that sets in motion a panoply of required actions, each of which requires your full attention.

After the shock has passed, however, there may come a realization that this can be a change for the better, not only for your psyche but for your finances.

The psyche part is the purview of other folks. Print resources can be helpful, like the oft-updated general standard What Color is Your Parachute?

Self-assessments such as The 20-Minute Networking Meeting by Ballinger and Perez and networking guides like The Pathfinder: How to Choose or Change Your Career for a Lifetime of Satisfaction and Success (Nicholas Lore) can guide a would-be catastrophe into a necessary first step towards exploring your dream career.

Job loss may also be the necessary first step to redesigning your financial life for long-term success. This is the time to:

» Visit your company’s human resources department.

» Examine your budget.

» Analyze your portfolio.

Take advantage of any resources available through HR, preferably before your last day of work.

Their guidance may include career counseling and job leads, but your immediate interest is COBRA, the program that allows you to keep (and pay for) health benefits from your company for up to 18 months.

A close second is finding out what needs to be done with any company benefits, such as pension, 401(K), IRA, or deferred compensation.

Depending on your employer, you may be able to keep your retirement plans in place or roll them over to a new employer. A recent Financial Advisor article by Christopher Robbins points out how much high fees can cost a 401(K).

You may opt to roll it to a new or existing IRA. If your income for the year will be substantially reduced, it could be a good time to consider rolling to a Roth IRA.

If you are clever, you have set aside several months of expenses as a cash emergency fund. This cushion allows you to breathe while you examine how you can easily tighten your belt.

Unless you’re already as ascetic or a hermit, there are always ways to cut a budget, from cooking at home to renting out a room to moving “down brand.”

In the same way water conservation is the best source of new water, budget reduction is a great way to “produce” more income.

If you are like most people born in the second half of the last century, your portfolio is likely to be a mishmash:

A little stock from a start-up you worked for right after college, a 401(K) passed through a few custodians as they swallow up each other, a Roth IRA from when you worked for yourself for a few years, and your current company’s assortment of retirement options.

How do you know if it’s enough, and in the right place?

A good fee-only financial advisor can help you answer these. But for the do-it-yourself aficionado, lay out your whole portfolio by account, showing each account’s allocation to cash, fixed income, small cap, large cap, and international investments.

Online research can help you determine what percent of your portfolio should be in each asset, depending on your age and risk tolerance. Then commit to reassessing and rebalancing your portfolio periodically.

By turning up your career awareness and tuning up your financial literacy, you’ll be more confident and a better asset to your future employer. That’s good for your psyche and your finances.

— Karen Telleen-Lawton serves seniors and pre-seniors as the principal of Decisive Path Fee-Only Financial Advisory in Santa Barbara. You can reach her with your financial planning questions at [email protected]. Click here to read previous columns. The opinions expressed are her own.

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