Four Ways to Prepare for a Job Loss
Let me start off by saying, I am a huge Dave Ramsey supporter. But I am also stubborn and like to do things my way. Dave suggests an emergency fund of $1,000 as baby step #1. This seems like a reasonable amount for flat tires and unexpected car trouble but what about life's bigger challenges? What about a job loss?
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I started my financial journey in January 2017 with gazelle intensity! I was knocking out debts left and right. It's incredible the kind of traction you can get once old habits are released. Living within your means is possible and it's exciting! Everything was smooth sailing, until last month. I began to notice a decline in my service industry.
I decided to put a halt on my debt payoff plan and continue building my emergency fund instead. A thousand dollars didn't seem like it would be enough to support me in the event of a job loss. I had a feeling my company would be reducing hours and I wanted to be prepared. This of course, was pure intuition but I put a lot of value in my intuitiveness. Sure enough, my boss came into my office sharing the news of multiple layoffs throughout the company. Me being one of them.
I had never experienced being let go before. There was some disappointment but no need for panic. I kept thinking about was how grateful I was to have a large emergency fund. Had I not stalled my extra debt payments I would have been a complete mess! We never know what sort of challenges life will deliver... but I strongly believe in being prepared.
Here are my top 4 ways to prepare and survive a job loss:
Tip #1: Create passive income streams. Just as we must diversify our investments it is wise to create multiple streams of income. This could be as simple as a few side hustles a month or starting your own business. These ventures require much effort but they can be quite rewarding, especially if your side business is doing something you love. I started a clothing company last year because I wanted to offer ethical clothing made in the USA from sustainable materials. Most people do not know where their clothing is from or who made it. I want to help promote positive working conditions and high quality products.
To be honest, Lettuce Amor feels like a passion project more than a job. It's fun, it provides an additional income source and it brings me joy to know I am living my values. As for side hustles, mine tend to change monthly. I am always looking for new ways to earn money and try new things. I recently joined a yoga studio part time to pursue my goal of becoming a certified teacher. Sometimes my life feels all over the place. I have many interests and I feel lucky to be able to explore them.
RELATED: Check out my post, "4 ways to make easy money."
Tip #2: Increase your emergency fund. Being gazelle intense is extremely motivating but it leaves you with very little support in a true emergency. I personally prefer having 3-6 months expenses set aside before moving onto Baby Step #2. Depending on your total debt amount I would suggest at least saving three months' worth of your rent/mortgage payment in a dedicated account.
Aside from having food on the table, having a roof over your head is crucial. I grew up in multiple apartments and experienced our electricity and water being turned off more than once. However, my mom is my hero. She somehow managed to support three daughters as a single mother. I want to always be prepared enough to avoid uncomfortable housing situations. My question to you is, have you ever encountered a emergency that outweighed your one thousand dollar fund? Please share in the comments below.
Editors Note: Once you have built up your emergency fund, you might consider refinancing your student debt. You can use LendEDU's FREE tool which could help you save thousands of dollars on interest by comparing options to refinancing your loans.
Tip #3: Stop spending. This goes without saying. If you're currently on your financial journey I hope you've already eliminated all unnecessary spending. There are so many ways we can reduce our monthly expenses by cancelling gym memberships and shopping for deals on car insurance. But the real challenge is saying goodbye to weekend trips to the mall and going out to eat when we're too tired to cook at home. Like everything else, these are learned behaviors and can be reversed. Practice being okay with owning less. For me, minimalism has been incredibly inspirational. I see my personal belongings in a new light and no longer desire trendy clothing or possessions. It's like Dave Ramsey says, "Live like no one else, so later you can live and give like no one else."
Tip #4: Be open to new opportunities. It's important to keep growing your network regularly. Stay open to meeting new people and learning additional skills. I enjoy local meet ups and online forums to stay connected with others in my line of work. Change is inevitable. We must be proactive in educating ourselves with new technologies and marketing growth. Update your resume frequently and engage in communities online and in person.
All in all, I feel this job change is a blessing in disguise. It is empowering me to level up and fulfill my deepest dreams. What would you do if money were not an issue?? I hope these tips provide a little comfort in knowing you have a cushion to fall back on. In times of loss it's critical we stay positive. When we come from a place of scarcity, we attract lack. Instead, set yourself up to come from a place of abundance and gratitude! Keep your head up! Whatever it is life is throwing your way, you can and will overcome it.
This post is brought to you by The Budget Awakens, a personal finance and lifestyle blog written by msrob0t. She is a fan of minimalism, traveling and all things Star Wars. Her motto is, "May the funds be with you." You can check out her debt free story here.