How You Need To Prepare For a Job Loss, Even If You’re Still Working
Experts are saying we’re currently experiencing what will be known as the start of a major recession. Unemployment rates are dismal and even if you’re lucky enough to still have your job, the economy may get worse before it gets better. To be frank, perhaps we should all be preparing for the worst.
Even if you’re still employed, you should be bracing for a potential loss of income — more than half of jobs in the U.S. are at risk, according to one analysis. And there are a few moves you need to make now, while you have income, to protect your finances in the future. It may sound doom and gloom, but as the saying goes — let’s hope for the best and prepare for the worst.
Revamp your budget.
If you don’t already have a budget, it is more important than ever to create one. If you currently have a budget in place but aren’t tracking your spending to make sure you stick to it, now is the time. You can read how to create a simple budget here and find a list of apps to track your spending here.
Experts are saying it’s important to keep cash on hand, so try to pare down your budget during these uncertain times. Create an “emergency budget” with just your bare essentials. Pinpoint those expenses you can cut — or at least reduce — until you know financial life will look like for the next few months.
Now is a good time to examine the items in your budget that actually bring value to your life. For many of us, content subscriptions like Netflix or Quibi are important right now. But maybe you’ve found that with so many workout classes available free online, you don’t need to pay for a virtual gym membership. By considering what is truly bringing you joy, comfort, or convenience right now, you can ensure that your spending is both aligning with your values and leaving you with enough to beef up your savings. Remember, you want to support local businesses and the economy, but you don’t want to do that at the expense of your own financial health.
Come up with a backup plan.
Beyond those small expenses, there may be some larger life moves you’ll have to make if you lose your income. That might mean moving to a cheaper city, finding a more affordable apartment, selling your car — the list goes on. While it might seem like overkill to think about those things now, especially if you have money coming in, it’s smart to have a Plan B and Plan C in your back pocket just in case. Consider the worst-case scenario and prepare two or three “big moves” you’ll make if times get really tough. If you lose your job, what will you need to do to downsize your life and stay afloat?
If it does come down to it, you’ll have a plan in place which will make the process a lot less taxing in the moment. We don’t make the best decisions when we’re under stress — this way, you’ll have made the decision in advance.
Yes, you need an emergency fund.
If you were already saving for an emergency, consider increasing your savings amid the uncertainty. If you haven’t gotten around to saving, now is the time.
You can read more about what emergency funds are and why they are important here, but generally, experts recommend keeping 3-6 months of basic expenses on hand in case of an emergency. That’s certainly not realistic for everyone, and some people may be able to save less, or they might feel more comfortable saving more. If you have a stable job, multiple streams of income, or are part of a two-income household, you may feel more comfortable with only one or two months of expenses.
However, if you have a job in an unstable industry or are the sole household provider, you’ll likely feel more comfortable with six months of expenses saved. Regardless, remember that there is no cookie-cutter answer to what your emergency fund should be–it all depends on what makes you feel most comfortable during this already challenging time. For example, I used to only have a four-month emergency fund, but given recent events, I’ve expanded it to five months. Either way, if you have money coming in right now, saving is the name of the game.
Beef up your resume.
While your job may feel stable at the moment, we don’t know what the future will hold, so it can’t hurt to give your resume a little refresh. Update your resume, portfolio, LinkedIn page — whatever you use to document your work history — with recent work accomplishments, tasks, roles, and responsibilities.
Look at what else is out there, too. Of course, it’s not a great time for job searching, but you can check other postings and see exactly what skills employers in your field are looking for at the moment, then spend time building those skills so you’re prepared if you need to enter the job search arena.
Consider a high-yield savings account.
Consider moving your savings to a high-yield savings account. My local credit union offers a 0.25% interest rate on savings accounts–and though that’s small, it’s significantly higher than that of many other major banks. While I don’t mind a low-interest rate on my day-to-day checking account, a high yield savings account can be a great place to store an emergency fund because of its higher returns.
While rates can vary by institution and time of year, some banks offer interest rates of 1.25% or higher. This is a great way to help combat inflation.
The hard truth is that these times are uncertain and we have no idea how long our jobs may last or if the economy will be flourishing or in shambles tomorrow. However, by making proactive and well-researched financial decisions for your specific situation, you can better prepare yourself for whatever comes next.
Simplicity Bryan is deeply entrenched in the worlds of self-help, gratitude, personal finance, and organization. She’s happiest paddleboarding with her pup and storytelling with a purpose. You can follow her here.
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