By Joshua Gross
YES, but perhaps not in the way you think; you certainly shouldn’t fear that long-term prospects are bad, but short-term circumstances can be bad. My answer will focus on the US, but some of this may be applicable elsewhere.
I’ve been through two bubbles/downturns (or one hit me twice, depending on how you look at it) and got laid off. Getting laid off is not fun and often has nothing to do with your work; in my case, one company shut down, and one entire large project was offshored. Both times, I was out of work for several months. Regardless of how you look at the tech market, you need to be aware that the industry moves quickly. In the US, there is essentially no security of employment.
- If you are not a citizen or permanent resident, you need to know the details of your visa. If you are laid off, what happens? Can you find another job? How long do you have?
- If you are laid off, the outcome depends on cushion. Conventionally, personal finance experts tell you to have 3–6 months of income stashed as liquid assets (cash, CD, or other insured savings). This should be more than most people think, since you are suddenly responsible for paying your entire health insurance premium. You should normally be eligible for unemployment insurance, but not necessarily. Some employers are not required to pay into unemployment insurance. You need to know if you are eligible. It’s easy to find out. I recommend having six months of savings to pay for rent/mortgage, car(s) & insurance, health insurance (you can easily find out what the full premium is, and/or go online and price out something through Get 2016 health coverage. Health Insurance Marketplace or your state’s market), gas, and food. Some people will tell you that you will spend less money, and this is true on average, but what if you need to fund yourself for a job interview trip? This happened to me.
- Don’t put all of your eggs in one basket. You rely on tech for your income, and you may be partly compensated in equity, so any investment (e.g., 401k) should not be tech-focused. I had friends who simultaneously lost their jobs and had their 401k’s lose most of their value because they were heavily invested in tech (this was during the dot-com burst). In exigent circumstances, you can use money in 401k’s, IRA’s, and other retirement investment vehicles. Don’t double-expose yourself.
Nothing bad may ever happen, but you will have the income to provide a cushion for yourself, and responsible investing can protect you further. It’s just a form of insurance, but most Americans don’t have it. A recent survey found that half of Americans couldn’t come up with $400 in an emergency (The Secret Shame of Middle-Class Americans Living Paycheck to Paycheck), and some of those would have to sell something or take out a car title loan.
Again, as a software engineer you’ll have plenty of money to save if you are even remotely careful and disciplined. You don’t build this cushion overnight.
What happens if you don’t have the money? Well, have you ever wondered why so many Americans are deep in credit card debt? This is one of the reasons, and paying for things that don’t take credit cards (like rent/mortgage, car payment) requires taking a cash loan that starts earning interest immediately and may involve a fee. It’s not hard to rack up $15,000 in debt and without a job, you can’t get another card and play the balance transfer trick (and again, cash loans work differently anyway). I know people who have spent a decade coming out from under this kind of debt.
I’m not trying to scare you. Wait, OK, that’s not true: I’m trying to scare you. I’m trying to scare you into creating this cushion for yourself and to diversify your investments. Employment in all fields is volatile, but tech is especially so. If you start the process of building a cushion and investing responsibly, then don’t worry