How to survive 5 recession hardships

By Kiplinger's Personal Finance Magazine

Many Americans have been affected by the recession -- but not all in the same way. Some face mortgage troubles and owe more than their houses are worth. Others face job layoffs. And in a tough economy, budding professionals face a land of less opportunity.

To provide the most valuable insights and resources for surviving this recession, we take a look at the most common hardships -- profiling a real person and then offering practical steps anyone can take to lighten the burden.

'I lost my job'

Cliff Heaton was stunned, but certainly not alone, when he became a "mass layoff" victim in January.

Mass layoffs occur when companies cut 50 or more employees at a stroke, and in January more than 2,000 companies made such cuts.

Why is a mass layoff so bad? If you're caught up in one, you'll have to find work in an economy in which hundreds or thousands of people with similar skills have just re-entered the job market, too. At the end of February, 12.5 million Americans were unemployed. What's even more disheartening is that so many occupations have been affected.

Heaton, 43, of Yardley, Pa., worked for a national market-research company. He had an inkling that his job was in trouble, given that he specialized in research on the crumbling financial industry. "Still, the layoff was very sudden, and this environment is scary," he says.

• Survival guide for the unemployed

From a financial standpoint, though, Heaton and his wife, Katie, have done everything right. The couple's prudence before his layoff means they have no debt outside their mortgage, and, he says, "we've been a bit cash-heavy lately." That's an understatement. Due in part to some farsighted coaching from financial planner Jonathan Heller, the Heatons have banked 16 months' worth of income. In normal times, says Heller, he'd recommend three months, "but these aren't normal times."

Because of their savings and because his wife works, Heaton has bought some time to look for his ideal job. He says he's "still in the optimistic phase." But he's not kidding himself about the job market. "In a couple of months, I'll start looking for something less than ideal."

What you can do in the face of a layoff:

• Save five months of expenses. While you're still employed, build up your savings. Among laid-off workers, the average time spent unemployed is five months for those 45 and older, and four months for younger workers. Try to have enough cash on hand to comfortably cover your expenses for at least that long.

• Set up a line of credit. Also, set up a line of credit you can draw on. If your home hasn't lost too much value, a home equity line is one option, and low-interest credit cards will work in a pinch. And don't wait till you're unemployed to begin networking.

• Don't take a break. If you lose your job, start looking for work immediately. John Challenger, the CEO of outplacement company Challenger, Gray & Christmas, says times are too tough to dally, even if you have severance pay.

• Network. Contact other unemployed people, join a job-search group specific to your industry and get coaching. High-priced outplacement companies that help with résumés, interviewing skills and networking are fine if you can afford them, but try lower-cost providers, such as Five O'Clock Club and Gray Hair Management. -- Bob Frick

Continued: 'Underwater' homeowner

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