Let's Get Depressed: Are You Ready For a Layoff in a Crappy Economy?
With the economy in a nose dive and the word layoff appearing more than “2.0” in all of our feed readers, perhaps you’re starting to wonder what would happen to you if the unthinkable happened: you get laid off.
First and foremost, that really shouldn’t be the unthinkable. The fact that it seems like such a strange event is a “head in the sand” mentality, because the days of corporate loyalty are in many ways dead and gone. You are a resource, and as such you can be downsized, cost-cut, and obsolesced just like any other piece of equipment.
With that out of the way, we work on the assumption that we will at some point be unemployed. Pessimistic I know, but it’ll make getting prepared much easier.
So now the question becomes: are you ready to go six months without a job? That’s about how long people in the US are staying in the job market right now, so it’s not an unreasonable number. Could you do it?
The easiest way to prepare for such an event is also the hardest one for the majority of people: stash away an emergency fund. It’s so much easier to save for retirement (there’s a separate account!) or a specific purchase (the new car fund!). But an emergency fund? It just sits there like a rock, barely growing, and taunting you when shiny electronics go on sale.
However, it’ll be your best friend when the inevitable layoff happens, so you might want to get started on it now.
Sit down and figure out your monthly necessary expenses, the things that have to be taken care of every month for you be still keep your head above water. The obvious ones are housing, utilities, and food. Not so obvious might be prescriptions, minimum payments on debt, taxes and insurance, co-pays for scheduled doctor appointments, and job hunting costs like gas, dry cleaning, photocopies, etc. Multiply that number by six. It’ll be a big and scary number. Make things safer (and scarier) by adding in the deductibles for all your insurances to have a true Emergency Fund.
Sit there and stare at that number for a while. Cry if you have to.
Now, figure out a way to get there. If you’ve not already set aside an emergency fund you’re going to feel like it takes forever to create one, especially if you’re just kicking $50 towards it ever other month. For it to build, you’ve got to throw every cent you’ve got at it. I know you’d rather use that money to pay down debt or contribute to your 401k, but if you lose your job, will either of those steps keep you in your house an extra month? Will they feed your family? I didn’t think so…
