Do you think you are financially prepared to survive a job loss?
The future is always uncertain. That may sound a bit pessimistic but if you think about it, you will realize that this is one negative thought that you need to have at the back of your head. The only way that you can survive any emergency crisis that is as grave as losing your job is when you have met the conditions to have financial security.
Despite the years that have gone after the US economic collapse led a lot of consumers to lose their job, we are no where near solving the financial difficulties of the average American household. According to the data recently published by the Bureau of Labor Statistics through the BLS.gov site, 7.7 million families have at least one unemployed member. This decreased from 8.4 million back in 2012. What is even more disturbing is the fact that only 4.5 million of these families have at least one member that has a full time employment. That means 3.2 million families either have one part time employee or is completely unemployed.
Living on a minimum wage is one thing. Living without any real income is another. How can you survive a job loss when employment allows you to earn money to pay for your daily needs? Nothing is really for free right now and you cannot let your family live on government support on your own.
Americans are in danger of a financial hardship after losing their job
This reality is even more put in the spotlight with the poll done by Gallup.com. Apparently, a lot of Americans will face immediate financial troubles in the event that they lose their jobs. In fact, the data revealed that 14% of the respondents believe that they will only last 1 week before they are plunged in a financial crisis! 1 week is too short of a time to recover and survive a job loss. 1 week is even too soon to get out of the depression that usually accompanies an immediate job loss. How can the 14% possibly survive this?
The data also showed that 29% can survive at least a month without a job and 26% said they are financially covered for up to 4 months. Only a mere 17% can survive up to a year and 14% more than that.
This is a disturbing scenario that tells us how unprepared a lot of Americans are when it comes to being able to survive a job loss. There are specific signs that will tell you that a job loss will lead to the demise of your finances.
- You do not have any savings. This is the money that you have tucked in your bank account. The amount of money that you have saved is the financial aid that you will give yourself in the event that your main source of income is taken from you.
- You are living from paycheck to paycheck. If your income is just enough to help you survive one month, then you are in trouble. This means your income is just enough to pay for your bills – nothing more.
- You are probably one emergency away from being in debt. Or in most cases, you are already in debt and one emergency can lead you to bankruptcy.
- Your credit score is in bad shape. Some people are able to pick themselves up to survive a job loss through a personal loan. If your credit score is low, this is an option that you cannot take.
These are only among the signs that will tell you that you are in danger of being in a financial crisis in the event you lose your job. You need to do something about this because you do not want to be rendered helpless when your boss suddenly decides that you are no longer needed by the company.
How to set your finances to survive unemployment
Fortunately for you, there are things that you can do to help yourself survive a job loss. The key is to prepare for it and to do it as soon as possible. Since the future is uncertain, you will never know when another crisis will happen that will lead to your unemployment. It does not even have to be economically related. Sometimes, it can be an illness that will leave you unable to work. Or it can be the illness of another person that you have to take care of full time. If you are not prepared for these instances, then you will really be in trouble when tragedy strikes in your life.
So here are 4 things that you have to accomplish as soon as possible to keep yourself from a financial disaster after unemployment.
- Build up your emergency fund to last 6-9 months. This is the money that you will strictly not use unless it is for an emergency. According to StatisticBrain.com, only 38% of Americans have an emergency fund to fall back on. It is not mentioned how much of an emergency fund they have. If you are unsure about the emergency fund that you will save up for, simply take your monthly expenses and multiply it by 6 or 9 – for the number of months that it will last. This should be exactly the amount that you typically spend, including the entertainment expenses. In case things are rough, you can use your emergency fund on bare basic necessities only. That way, you can probably extend the amount to last you for more than a year.
- Diversify your sources of income. Another thing that you may want to do is to diversify your income sources. Set up a passive business like a rental place. You can also put money in stocks and bonds. All of these while working on a day job. That way, if you suddenly lose your job, you still have two sources of income. That should help survive a job loss and keep you from panicking.
- Get used to frugality. When emergency strikes, that is one of the reasons why you may want to use a frugal budget. It will help you prolong your emergency fund or it will keep you from putting yourself under so much debt that you have no way of getting out of it unless you file for bankruptcy. But the thing is, why do you have to wait for an emergency to happen? Why do you have to wait until unemployment for you to start living a frugal life. The people who think that frugality is restricting and depriving have got it all wrong. That is not how frugality works. It will make you feel abundance despite living on a minimal budget. What you save through a frugal budget can be set aside towards your emergency fund or can be used to invest.
- Have an unemployment plan. Lastly, you want to have an unemployment survival guide in place – just in case. Having steps to follow will allow you to survive a job loss even if you are too depressed to move. It will keep you mechanically moving even if your mind and heart is not 100% into it. Sometimes, figuring out what to do is what keeps us stuck. So while everything is great and you are feeling secured about your finances, you may want to think this over already. This plan can include a list of the programs that you can get help from or people that you can count on for help. It can even be a list of the things that you can sell for extra money. These plans will really help you in trying times.
Unemployment is a scary situation to be in especially if you have children depending on you for financial aid. Make sure that you are prepared, not only for your sake, but also for theirs.