Preparing For Job Loss: Savings
“Experts say you should have enough money to cover your expenses for between 3 and 9 months”
While you are employed:
First, congratulations and great job. If you’re employed and planning ahead you’ve set yourself up for long term success! Go you!
Pay yourself first. Put something away in savings every paycheck. This is your emergency fund, don’t touch it no matter how tempted you are!
Consider job loss mortgage insurance if you own a home. In some cases this is even free, often it’s very inexpensive. There are other insurance options designed to protect your income, these are more complex and often expensive. I’m not going to detail them here as they are not appropriate for many people.
Home Equity Line of Credit (HELOC) - apply for this before losing your job. (that means now) It costs you nothing if you don’t use it. It can be a lifeline if you do need it. If you don’t have friends and family in a position to assist this may be your best option.
If you’ve already lost your job:
Don’t panic. Or yeah, panic, but use the energy to develop a plan.
Friends and Family - you may have friends and family able to help. This seems obvious but it’s important to consider. I’ll discuss ways friends and family can help you cut costs in a future post as well.
Unemployment Benefits - these vary by location but generally in the USA you can collect up to 26 weeks of Unemployment Benefits. The amount varies by program and your income level.
Retirement savings accounts - this is likely your worst option. It may be better than losing your home, it may not. In the USA you can qualify for a 401K hardship withdrawal to avoid eviction or foreclosure. You will still pay taxes and a 10% penalty on the amount you withdraw. Again, this is likely your last resort and rarely a good financial decision.
Stay positive! I'll cover evaluating your expenses in the next post.