NEW YORK -- The economic fallout from the attacks on the World Trade Center is starting to spread across the country with manufacturers, airlines, restaurants and hotels announcing layoffs, involuntary vacations and salary cuts.
Financial planners recommend that people whose jobs might be in jeopardy take steps as soon a possible to shore up their finances to get through the lean times.
"The very first thing you have to do is build up as much emergency savings as you can - build them up like a squirrel in autumn," said Robert K. Doyle, a financial planner in St. Petersburg, Fla.
That means cutting back immediately on all unnecessary spending, he said. Stop eating meals out. Cut back on entertainment. See what clothing purchases can be put off. Don't even think about buying major appliances for the house.
"If you don't have any emergency cash cushion, you may need to take very drastic steps to build one," he added. Stop making contributions to your 401(k) and Individual Retirement Account. Pay just the minimum on your credit card balances. Don't make any extra mortgage payments.
"Building that cash reserve will give you comfort, will let you sleep at night," Doyle said. "It will be there if you need it. If you don't, you can always go back and replenish your retirement accounts or pay down credit cards."
Ian Bishop, a senior financial adviser for American Express in Upland, Calif., says getting professional help might be worthwhile.
"I can be less emotional and more logical and help with decisions that will benefit people in the long run," Bishop said. "Gut reactions may feel right in the short run, but could have very negative long-term consequences."
Clients already are seeking help in evaluating possible career changes forced by the weakening economy, he said. One is a worker in the aerospace industry who believes he will soon be laid off.
"He's thinking of starting his own business in patent consulting and wants help in estimating start-up costs, getting health insurance and calculating taxes," Bishop said.
Bishop said workers who are laid off should do everything they can to maintain their health insurance. One possibility is taking advantage of the Congressional Omnibus Budget Reconciliation Act, or COBRA, which allows workers to buy into their former employer's health plan for up to 18 months.
"You don't want to have to deal with a medical catastrophe on top of a job catastrophe," Bishop said.
Both planners offered other suggestions:
- Don't default on your debts. Call your mortgage company, bank and credit card companies and explain your situation and ask how they can help. Some might be willing to reduce your monthly payments, while others might lower the interest rate on your outstanding balance.
- Think about getting a part-time job to bring in some money for weekly expenses. Or perhaps someone else in the family can get work while you train for a new job or wait to be recalled to the old one.
- Collect unemployment benefits if you qualify.
"This is not welfare, and there's no stigma to it," Doyle emphasized. "This is insurance. You paid for it, and you should get it when you need it."
- Cut your housing costs. Determine if you can refinance your house - or even your vacation home. Move to a cheaper apartment. Take in a roommate.
And, turn to the people closest to you - get help from relatives.