The biggest financial news story today?  The breathtaking collapse of Wall Street firm Bear Stearns, which JP Morgan agreed to buy over the weekend for a mere $2.00 a share, a pittance compared to the trading price of the firm one year ago - a whopping $170.00 a share and even last Friday, when it was still at about $30.00 a share.  So, investors big and small alike are certainly being burned in this mess, but what about the employees of the firm?  It’s a virtual certainty that with the buyout by JP Morgan, a large portion of the 14,000 employees of Bear Stearns will lose their jobs.  What’s more, the firm is one-third owned by its employees.  Most Wall Street firms, including Bear, pay employees a large portion of compensation in company stock.  So if the stock tanks (recall Enron), there goes your hard-earned salary.  All in all, it’s a pretty bad picture for the employees, who are facing a double whammy - -layoffs and the shocking plunge in value of their company stock.

CNBC reported today that employees of the firm were commenting off camera that their retirement and college savings funds had been wiped out and that after decades of work, they would “have to start over.”  If this can happen to a large investment bank like Bear Stearns, who isn’t vulnerable?  What’s the lesson learned here?  As the financial experts say, don’t have your job and all of your investments tied up in the same company.  If the company is going south financially, that means its stock is probably not doing very well.  In good times, everyone is flush with cash and excitement, but the bad times can hurt a lot more.  When my husband’s tech company filed for bankruptcy and went through eight rounds of layoffs after the tech bubble burst, the employees were reeling from the loss of jobs and stock options.  To add salt to the wounds, for the employees that were spared, my husband included, the company suspended its matching contributions on employee 401(k)s and raises were minimal to nonexistent until the economy picked back up.  Considering that many of us derive most of our money from our jobs, it makes sense to spread our cash around a little, and not rely on the bigwigs in the corner office to shape our destiny.  To me, that means:

• Don’t invest all your cash in company stock.  Be diversified.  Open an account at Vanguard investments and buy index funds.
• Create a second source of income, like teaching yoga or, hey, blogging, so that the cash stream doesn’t completely dry up if you do lose your job.
• Look into buying rental property that can generate some extra cash for you.  Make sure that the rent you charge more than covers your mortgage, taxes, insurance, repairs, and tenant vacancies.  That way, you can breathe easier with some positive cash flow from an investment that is not tied to your job.  For us, having the cash flow from rental property puts us at tremendous ease.
• Network, network, network while you still have a job (I have got to work on this too).  That way, you’re not scrambling to call everyone you ever met and their buddies to beg for job help if you are suddenly facing a layoff.  It just smacks too much of desperation.

 Of course you cannot spend your nights worrying about whether you are going to get the ax at work.  There are macroeconomic problems, such as the subprime mess and ensuing credit crunch, that many of us did not create and cannot control.  However, with these “uncertain economic times,” one cannot be too prepared in the event of a personal financial tsunami.