How to Prepare Financially for Job Loss

Emergency planning is highly recommended for all workers in the event of a sudden layoff. Actively preparing for sudden changes to your financial situation will ensure that you’re set up to take care of yourself and your family until you’re able to get back to work. To prevent job loss from putting you in a difficult financial situation, here are three things you should consider doing:

Re-Examine Your Budget

Save some extra cash by reducing expenditures. Most households earn two full-time incomes, and that may open the door to some luxurious spending – if your current budget plan is based around two incomes, consider how life would differ if you only had one. Then, reassess if you’re spending your money in the right places.

Changes in your spending do not need to be astronomical; small changes can help. For example, you could cancel one of three streaming services you’re subscribed to, you could reduce your internet bandwidth, or you could order takeout once a week instead of three times a week.

Add to Your Rainy-Day Fund

Every household with expendable income should prepare a ‘rainy day fund’ because life is full of unexpected twists that may require you to spend large amounts of money at a moment’s notice. If you could establish an emergency fund that would last you up to 8 months with no additional income coming in, you’d be well set up for any financial trouble. You can use your rainy-day fund to support your mortgage payments, your kids’ student loans, groceries, car repairs, property tax, etc.

Focus on Your Debt with Supplemental Income

Even with a steady income, all debt should be addressed as soon as possible to prevent a bad situation from becoming worse. If you lose your job or have a good feeling that you will in the near future, it’s important to focus on your debt and work hard to pay it off. While it may not be your priority after you lose your job, if you have high-interest debt, payments could accumulate beyond your means. If you’re currently employed, it would be wise to find ways to supplement your income to pay your debt, which means finding additional sources of income on top of your established pay. Common examples of supplementary income include freelancing, busking, joining the sharing economy (i.e. renting out for Airbnb or driving Uber), or selling items on eBay or Kijiji. Losing a job is not fun, and it can perpetuate financial worry. For more information on how to remain financially stable during trying times, contact Andrea Orr today!