Canada: Being prepared crucial if the economy tanks

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Being prepared crucial if the economy tanks Ellen Roseman BUSINESS COLUMNIST SURVIVING THE SLUMP -------------------------------------------------------------------------------- Second In A Series LAWYERS CAROL Bell, 39, and Karol Roseman, 44, were earning $150,000 a year when they married in 1999.

Now, they live on $60,000 a year, after quitting their jobs and starting to work part-time from home.

Instead of eating out three or four times a week, they make their own pizza from scratch and slow-cook ribs on the barbecue.

``Cooking together is a huge part of our relationship,'' says Roseman. ``We're very adventurous and try out new things.''

The childless couple decided to get off the fast track and strive for a more balanced life. Bell runs her own legal practice, while Roseman left a legal publishing job to work as a club organizer for the Special Olympics.

They live in a modest $200,000 Richmond Hill townhouse, paid for with cash, and gave up their second car. They threw out most of their credit cards, cancelled their life insurance and switched to a no-fee virtual bank.

And while they used to enjoy travelling in style, they now take camping vacations close to home.

When your income is cut in half, you have to figure out ways to cut back your spending. Trying to maintain the same standard of living through credit can mean financial disaster.

When forced to retrench, it's also important to have a strong network of family and friends. Their support will keep up your spirits and help you find new work in the months ahead.

``The more people you tell you're out of a job, the sooner you'll get back into the workforce,'' says accountant Jim Oates, who was laid off just before Christmas.

Hired again in February, Oates now has a better job, which he found through spreading the word.

His advice: Never work so hard that you lose your social network.

``Join a religious organization, a social club, a bowling league, so you have a network to build on. Do people favours so they'll be willing to return your favours,'' he says.

``Get the rust out of your networking skills now, before you're unemployed. Networking is how the world works.''

When asked how to survive a slowdown, many of the experts we consulted said you should start getting in shape right away.

``Make sure your relationship with your boss is in good repair,'' advises John Challenger, head of the international outplacement firm Challenger, Gray and Christmas, based in Chicago.

``People who are not liked by someone in authority are always the first to go when business conditions become unfavourable.''

Sitting around in limbo waiting for the next assignment is risky when a recession looms. If your work dries up, find something else to do with substance to it.

Make yourself indispensable, so your boss knows there will be a big void if you leave.

``Build your social capital,'' Challenger says. ``Promote yourself to people in your organization and tell them about the impact you're making. Don't be invisible.''

Upgrade your skills, especially in the technology that relates to your job. See if your employer will pay for these courses.

Keep a resumé going on your computer and update it when you do new things.

Set aside enough money to cover three to six months' worth of earnings. You need a cushion if you lose your job and your severance package runs out. If your savings are depleted, start setting aside money from each paycheque.

When leasing a new car, says Toronto accountant Martina Wood, watch out for stiff penalty charges if you want to get out early.

``If you're leasing for work, try to have some protection built into the contract by your company,'' she says.

You can also ask a friend to take over your car lease or check Internet-based networks such as Swapalease.com and LeaseTrading.com.

Michael Penfield, CEO of New York-based LeaseTrading.com, knows how inflexible leasing contracts can be. His wife had 14 months left on a lease and wanted to trade up, but was told she'd have to pay the entire balance.

A former investment banker, Penfield started his full-service lease trading company in February, 2000, and launched the Web site in January. Besides cars, he also handles leased trucks, construction and office equipment.

Wood recently wrote and published her own book, Hold On To Your Money: Financial Survival For Today And Tomorrow ($21.95 from http://www.Indigo.ca or http://www.holdontoyourmoney.com)

In her view, a good budget is the best way to get control of your finances and understand your situation.

``The good news is that preparing a good working budget is easier than cleaning out the garage,'' she writes.

Using Wood's budget worksheets, which can be downloaded from the Internet, you look at your income and expenses for the next 12 months.

You identify essential expenses (mortgage or rent, transportation, food) and non-essential expenses (entertainment, vacation, gifts).

Then, you figure out how to pay yourself first. This means putting money aside for savings before spending.

In other words, you decide what's necessary and what's discretionary and sandwich your savings between the two columns.

An amazing transition occurs when people make conscious decisions about how to spend money, says Wood.

They start to save and when they see money building up, slowly at first, they enjoy the feeling that they are creating some wealth, or security, or next year's vacation.

Of course, the whole thing can fall apart if you can't distinguish between wants and needs.

``A couple of weeks ago, I did a short personal finance workshop for university students and described separating expenses into necessary and discretionary,'' says Wood.

``One of the students said his social life was an absolute must for him, and he includes his social spending (mostly on pubs, $200 a week) in the non-discretionary section of his budget.''

To survive an economic slowdown, the spending mindset must be adjusted and honest choices must be made. Taking responsibility is key, Wood emphasizes.

Ann Douglas is the mother of four children, ranging in age from 3 to 13 years, and a freelance writer who works from home in Peterborough.

In Family Finance (Prentice Hall, $21.95), she gives tips for trimming the household budget when incomes are scaled back.

Come up with creative ways to negotiate for the best possible deal on home repairs.

``If your roof needs replacing, chances are the other houses on your street that were built at the same time need replacing, too,'' Douglas says.

``Get together with your neighbours and hire a roofing contractor together. See if you get a group discount on roof repairs.''

Consider joining or starting a food buying co-operative so that you can purchase food directly from wholesalers. This can cut your food buying costs by 25 per cent or more.

Get rid of those gimmicky phone features that cost a couple of dollars apiece. Make sure you have the best and cheapest long-distance service.

Cancel your cable TV altogether or cut back to a no-frills cable package.

Rent videos instead of going to the movies. Trade in your old CDs or books at a second-hand store. Borrow books, CDs and videos from the library and use the Internet there, too.

Buy sports equipment second-hand and, at the same time, sell all the unused sports equipment that you've accumulated in your garage or basement.

Deborah Noel is a counsellor at the Tapscott Employment Resource Centre, a joint project of Human Resources Development Canada, the City of Toronto and Centennial College.

Her brochure, Living Frugally In Toronto (available from the centre at 416-335-5490) has listings of second-hand stores, factory outlets and charities that provide clothing for job interviews.

There's also the Foodlink Hotline (416-392-6655), which gives information on food banks, budget shopping, healthy eating, community kitchens and gardens and school-based food programs.

Noel knows from experience how to save. She left her husband last year and bought a $130,000 bungalow, ``the cheapest house in Toronto.''

Without money for a down payment, she managed to save enough in a few months by cutting back sharply on eating out, going to movies and buying books.

Entertainment is the first place to look when you're trimming the fat, experts agree. It's discretionary spending that can be scaled back.

Besides, you can create your own low-cost fun.

``Toronto is an excellent city to be broke in,'' says author Wayne Roberts. ``There are great parks and swimming pools and the recreational programs are still free.''

Busy working parents often give children possessions instead of time, Roberts says.

``A slowing economy can be a gift for kids. It's actually possible they will look on it as the best time they ever had with mom and dad.'' http://www.thestar.com/cgi-bin/gx.cgi/AppLogic+FTContentServer?pagename=thestar/Layout/Article_Type1&c=Article&cid=986013139020&call_page=TS_Business&call_pageid=968350072197&call_pagepath=Business/News&col=969048863851

-- Carl Jenkins (somewherepress@aol.com), April 01, 2001


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