saving money

Planning for the Worst: Job Loss & Financial Security

What would happen if you lost your job tomorrow? Would you panic because you have nothing reserved in your bank accounts? Or would you stress a little and then relax because you’ve thought about this? In light of the recent government shutdown in the US that is creeping to the one month mark, it has us thinking about our financial security.
Thousands of federal employees are not getting a paycheck and more are working… but not getting paid. D and I were at risk a few and almost lost our jobs. Working for the same company has its benefits and drawbacks. Both of the locations we worked at were on the chopping block to be closed meaning we would need to look for new work. Luckily, we were spared and eventually relocated.

Whew. Now I stay home with our baby and D works full time. If he were to lose his job, what would we do?

Planning for the Worst: Job Loss

Have you thought about your financial security before?

Financial security is more than just having a few thousand dollars in the bank. Sure, you need to have an emergency fund of sorts. But in that account, what type of emergency would those funds stretch to cover? Two weeks without pay or two months?

Scenario: You just got laid off and have zero income for your household. You have the remainder of your paycheck in your account (we’ll say it’s $2000) and just a few bills left to pay this month. By the beginning of the next month you’ll need to pay your mortgage/rent, insurance, utilities, phone bill, any memberships, car payments, credit card payments, and buy groceries. With that remaining $2000, would you be able to cover all the bills or do you have an emergency fund to help you out?

It’s a scary thought to imagine yourself without any type of income but all of your bills and expenses going out. If your financial situation frightens you when you think of this scenario, keep reading! We have a few tips to help you.

Look at your budget. Regularly.

Everyone needs some type of budget. I don’t care if you’re a billionaire tech giant. You still need a budget. A budget is there to let you know how much you bring in every month (paychecks) and how much money flows out (bills, mortgage/rent, controllable expenses).

Where to start – bills and essential expenses

Items on your budget that are considered “bills and essential expenses” would be:
Mortgage/rent
Internet
Utilities (water, gas, electric)
Insurance
Groceries (also considered a “controllable expense”)
Phone plan (also considered a “controllable expense”)
Loan payments
Gas for car

Notice anything missing? Yeah, services like Netflix and Amazon Prime are not essential. Gym memberships aren’t either. Some gyms will allow you to cancel your membership early if it is due to job loss or relocation. You have to ask and generally speak with a manager.

Once you have a list of your essential expenses, note how much each one is every month. This is best done in a spreadsheet or Google Doc.

Where the work comes in – controllable expenses

After your essential expenses and bills are on your budget, look at everything else you’ve spent money on in the last 30 days. We use Mint to categorize our expenses before we put them into our spreadsheet. Apps like Mint provide a real-time look at your transactions and balances across all accounts you connect to it (including loans). We take our transactions from Mint and put them into our spreadsheet by category.

On your spreadsheet, put some general categories:
Groceries
Pets
Gas for car
Eating out
Medical
Shopping
Dry cleaning
Entertainment

This list can be as long or as specific as you need it to be. We also add in a line for our baby, home maintenance, and car maintenance.

Total everything up – bills, essentials, and controllable expenses. Subtract that from your income. Do you have anything left over?

What would you be willing to cut or reduce in the event of a job loss?

That’s a big question: what can you do without if you lost your income?

For us, it’s an easy question because we’ve talked about it (and talking about loss of income is a real conversation you need to have with your partner!). We would completely get rid of Netflix, eating out, entertainment, dry cleaning (unless we needed a suit cleaned for an interview).

Picture yourself without a job. Without that sweet paycheck every two weeks, I bet you can come up with a few things to nix right away. Other things might be harder. This could include cable, gym membership, or your car.

If you are a two car household and there is a job loss of either one or both partners with no prospects, the idea of selling one of your cars doesn’t sound so crazy. This is especially true if you still owe on that car.

What can you reduce?

There are line items you can completely rid yourself of like we mentioned above and there are plenty more that you can reduce. Items that are essential to your life and your job hunt (if job loss occurred).

Groceries is a BIG chunk of everyone’s family budget. We always have a goal of only spending $50 on groceries, but sometimes it is hard. We always run out of more expensive staple items all in the same month! Know what the bare minimum your family eats on a regular basis and budget around that. You’d be surprised how much all of those extras are costing.

Your cell phone plan can be reduced too. Call your current provider and ask for your bill to be lowered or cut your data plan down. If they won’t work with you, you can always switch to another provider. We have Google Fi and love it. The plans are very affordable (cheaper than Verizon!) and they offer great coverage. Use our referral link and save $20 on your first bill!

Other areas that can be reduced are water, electric (with a conscious effort), and internet (call provider or switch).

How long could you go with what you have?

It is recommended by many in the personal finance field to have at least three months of expenses in a savings account, preferably six months or more. This is to be used for a variety of emergencies including job loss. You may have a nice savings account, but have you thought about all the items (food, toiletries, etc) that you consume on a daily basis? Do you have enough to get you through a month without buying anything?

Food.

How much does your family eat in a two week period? A family of three will eat 9 servings of food a day (one serving each for three meals). I recommend that you have at least two weeks worth of food for each member of your family on hand (FEMA does too). This comes to 42 servings per person. This will cover you in the event of a natural disaster or job loss. Just make sure to use the “first in and first out” rule to rotate and eat through your pantry.

I recently inventoried our pantry. We have approximately 440 servings of food (loads of rice and beans). Between the three of us eating a combined 6 servings a day (we don’t eat breakfast and Little Guy is still partially drinking formula), our current food stock would last us over two months. We’d have to be very cautious and seriously ration, but we could do it.

Medicine.

Medication is expensive without insurance. If you or a member of your family regularly takes a prescribed medicine do a quick inventory of what is on hand. Do you have an adequate (2-6 week) supply? This could include heart or blood pressure medication, insulin, or medication for migraines.

Ask your doctor now if they can prescribe a higher count for you rather than 30 days at a time. It is allowed only on some medications and only certain pharmacies may fill them.

Pets.

Also consider your furry family members. Do you have enough food for two weeks for the critters? This could mean having a small bag of food on hand for emergencies (natural or otherwise). If you do, just make sure you have a reminder on your calendar several weeks before it expires.

Kids.

Do your kids require any special food or product? The same applies to them. Have enough for at least two weeks. With formula for Little Guy, I always have a month’s worth on hand because it is more expensive.

Helping to make ends meet.

There are a variety of ways to either decrease your monthly expenses or increase your income (side hustle). You can do both and have a good amount to save while you’re still making an income.

Declutter and sell your belongings.

Even if you haven’t experienced job loss, this is a great way to make a little extra cash. In 2017, we made $1500 from our garage sale after we decluttered! You can sell items on Facebook, eBay, Poshmark, and in person at stores like Vintage Stock and consignment stores.

Take surveys and use rebate apps.

I made this post as a list of extra ways to make cash before Christmas, but it applies to any time of year! I recently did a survey that I earned $75 from. It was worth the little bit of time I would have spent on the computer anyways.

Call your creditors.

Whenever job loss occurs, most financial institutions have programs that can defer loan payments with little to no extra interest. It of course depends on the bank, but it never hurts to ask. The main goal is to not become delinquent and not get into more debt.

It’s okay to use resources in your community.

There is no shame in asking for help. Everyone understands that hard times come and hard times go. It’s all a part of life. And you know who understands the most? The people that work and volunteer at the food banks and community centers.

Google what food pantries and other resources your community offers and make a list. Even if you don’t need it now, you’ll be prepared if the need arises. It is always better to be prepared than frazzled and frantic looking for help.

Talk with your partner.

I can’t emphasize enough how important it is for your family to have a plan together in the event of job loss or loss of income. You should both be on the same page with your finances. By creating and reviewing your budget together, you are able to see all expenses, track them, and determine where you need improvement.

You will also be able to better optimize your budget even if you don’t have a loss of income! Together you can find ways to reduce your expenses if you find that you are over spending. If you spend less you can always save more.

2 Comments

  • Anna Martin

    Amanda, this is so well written and timely. I’m sure there are thousands of people right now wondering if they’re going to make it through the shut down.

    The article resonates with me as both myself and my husband lost our jobs in the same week in early 2016. We were previously bringing in a six figure income and had $88,000 of consumer debt.

    It’s only after something like this (we call it a PEC – Personal Economic Crisis) that people become savvy and really look at paying off debts, clearing mortgages, stockpiling necessities, etc.

    I would wish this on no one.

    Thanks for the excellent advice and I hope many people facing almost one month of shutdown find this post and utilize your points like an action plan.

    • Amanda

      Thank you so much Anna. I agree that no one should have to face this type of situation. It especially should not happen to government employees. I’m glad that you and your husband have become financially savvy after job loss. It’s amazing what a PEC I will do for you long term.

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