If you have about three to six months of money set aside for emergencies, then losing your job would be uncomfortable, but not as traumatic as being in debt and living paycheck to paycheck. Trying to predict the marketplace and how long your job will last is beyond your control; however, what you can forecast is how well you manage your money.
Life is full of changes and even though a job loss may seem like the end of the world, it’s not. In reality it could be a fresh start not only with a new job but with a better way to manage your money in helping you prioritize your finances.
It’s not surprising that most people have their financial security attached to their job and when you face an unexpected job loss, it can set the stage for a living nightmare. The good news is you will survive. Here are some tips from Dave Ramsey, a New York Times bestselling author of “Total Money Makeover” who has personally experienced the trauma of a financial disaster and recovered stronger than ever.
Below are some questions I asked Ramsey regarding concerns and worries that people have when experiencing a job loss. Hopefully you will pick up a tip or two that will ease your financial burden and put you on a good path to recovery.
What is the best way to stretch your finances when your income is dependent on overtime hours?
The most important thing anyone can do financially is keep a monthly written budget. Give every dollar of your income a name before the month begins. When you know where your money is going you can prioritize your expenses and find a place to cut the budget. If money is tight, you shouldn’t be in a restaurant unless you are waiting tables. Food, shelter, basic clothing and transportation to work are necessities. The maximum cable package is not.
In addition to reducing expenses such as cable, eating out, etc., what are some other things people can do? If you’ve cut back, and there’s still too much month left at the end of the money, then you have to find ways to increase your income. Take a part-time job – deliver pizzas, bag some groceries, mow some lawns – whatever it takes to get you through the rough time.
What do you tell yourself in order to cope with an unexpected financial loss? How do you keep moving forward? Think long-term. This too shall pass. If your income has been cut or eliminated, then find something you can do until you can find another job. It may not be THE job but get A job. You are much more attractive to an employer if you are working and not stressed about money.
Hindsight seems to be full of “I should have” however you can’t go back in the past – what can you learn from this? I hate for someone to face a job loss, but it can be a wake-up call. When you get a new position or increase your hours start putting money away for emergencies and then get rid of debt. If you are debt free, and have a fully funded emergency fund for three to six months’ worth of expenses, you can ride out any financial dips that come along.
Additional insight? If you foresee a layoff coming, stockpile all the cash you can. Stop paying extra on debts temporarily. Try to get as much money as you can into that emergency fund. Also, you need to look beyond the layoff. Is this the career path you really want to take? Some people get laid off from a job they hated anyway, and it becomes a blessing because they can really focus on their dreams.
Dave is presently on a national tour presenting Smart Money and EntreLeadership events, offering tools and techniques on effectively managing your money and business.
