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I Just Got Laid Off – Part 1

work This is the start of a three-part series on what to do if you get laid off. On the show today, we discuss what to do today before you leave the building. Over the next couple of weeks, we’ll discuss Part 2 – what to do in the next couple of days and then move to Part 3: moving on – going for your next job. So please check back in!

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Getting laid off is one of the most stressful events anyone goes through. So before we get into details, take a deep breath. You can expect to feel a whole range of emotions, even if you weren’t completely surprised. It’s a grieving process. Psychologists have identified five stages that we go through when we lose something or someone:

  • Denial
  • Anger
  • Bargaining
  • Depression
  • Acceptance

These stages don’t necessarily happen in sequence. You may feel more than one at the same time. You may jump around. You will feel it how you feel it. What’s important is to understand what’s going on within you. It’s only natural.

Your job may have been taken from you, but your talents haven’t been

Your unique skills are still yours. You still have that great personality. You’re still an incredible person. And you know it!

With that mindset, and knowing that you will bounce back, here are some things to do, and things not to do, before you leave the building today.

Don’t burn bridges

Life is funny. Things change quickly. If you show class, it will be remembered. So filter what you say.

There may be a temptation to lash out. Resist that urge, because nothing good can come from it. Sure, you may feel better at the moment, but that feeling will quickly fade into regret. It’s much better to conduct yourself very professionally.

COBRA

You will have to decide whether or not to extend your health insurance with the company. But you have 60 days to make this decision so don’t make it today. Talk to two or three insurance brokers who sell individual insurance. In almost all cases, you will find that you can get similar coverage for less money.

If you have one or more pre-existing conditions, it might make sense to sign up through COBRA. But first, check out comparable policies with several insurance brokers and get their advice.

Your 401(k)

Here’s another decision you don’t have to make today. In fact, there really isn’t much of a time limit on making this decision. A lot of people still have money in an account through an employer they haven’t worked for in seven years!

Resist the urge to cash out. You may feel stressed about money. We’ll talk about that more in an upcoming show. The Wall Street Journal reported that 40% of workers in their 20s and 30s cashed out their 401(k) when they changed jobs. As we discussed this on a previous Bigg Success Show, this may be a costly decision.

Before you decide what to do with your 401(k), you’ll want to investigate your options. Find a plan that offers the right combination of options and low fees. One thing you should find out, when the subject of your 401(k) comes up, is if there are any exit fees. This will be useful in your decision making process.

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Your final paycheck

If you get your final check today, be sure to verify everything. For example:

  • Were you paid the correct amount for the time you’ve worked since your last check?
  • Did you get the severance pay that you should have?
  • Were you paid for the vacation days you haven’t used?
  • Is everything in accordance with your agreement with your employer?

Other issues

You may be asked to sign releases and other documents. You don’t have to sign anything right away. Read the documents carefully. If you don’t understand something, ask. If you’re not satisfied with the answer, seek professional guidance from an attorney if need be.

Reach out

Finally, if you can muster the emotional strength, reach out to the people you worked with. Make sure you have their contact information. You never know when it might come in handy.

Thanks for reading our post today. We hope you’ll check in again tomorrow. Until then, here’s to your bigg success!

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I Need Money! Should I Cut Back on My Retirement Plan Contributions?

graph_barThe phrase “perfect storm” has been used more recently than when the movie was out! Here in the United States, we’re being hit with rising costs, falling home prices, volatile stock prices, the subcrime (oops, make that subprime) mortgage crisis, and talk of a possible recession.

Recently, we discussed why cashing out a 401(k) is one of the worst things to do in response to these tough times.

Today, we want to discuss cutting back on contributions to a retirement plan. Two to three months ago, the word was that people weren’t reducing the investments they make for their golden years.

Even now, the overwhelming majority of people aren’t making any changes. However, there is evidence that more people are considering (or are) cutting back.

It’s certainly understandable – insurance, groceries, gas, taxes all keep going up. Investing less in a 401(k) is a way to put more dollars into a paycheck now.

3 reasons not to cut back on your 401(k)

#1 – Contributions are made with pre-tax dollars – Assume you’ve been contributing $1,000 a year to your 401(k). You stop making contributions so one would think that would mean $1,000 more in your paychecks over the course of the year. But you have to account for taxes – if you’re in the 30% tax bracket, you’ll owe $300 in taxes on this $1,000. So you’ll only net $700 by stopping your contributions.

#2 – Money accumulates tax-deferred
– With your retirement plan, money is compounding on money on top of more money. And since you don’t pay any taxes on it until you take it out, all of your money keeps working for you, rather than paying a part of it every year in taxes (and therefore having less money to accumulate on top of).

#3 – Employer match – Employers match as much as 100%, up to some limit. So say, for example, you contribute 3% of your salary and your employer matches that. It’s like found money … your employer is guaranteeing you a 100% return on your initial investment.

Now granted, this is part of your overall compensation. However, we often look at our tax refunds as found money, when it is just a return of an overpayment. This is truly found money – the employer is giving you money as long as you invest up to the maximum. It’s your choice.

Cutting back could cost you $53,551

Consider a fictional 30-year old woman who has been investing 3% of her $50,000 salary, with her employer matching it 100%. Money is tight, so she decides that she will stop investing for three years. This $125 invested for just three years, and then left alone until she retired (at age 62) would have grown to $53,551, if she earned just 6% on her money.

So if she invested just 3% of her salary for the next 3 years, it would grow to 108% of her salary when she retires.

A small amount of money now makes a huge difference in the long term. So at least try to keep investing as much as your employer matches because you get a huge boost in your portfolio by hitting that target.

Until next time, here’s to your bigg success!

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