There's no doubt about our economy falling into difficult times right now. For many families, this involves one or more people in the home to either be laid off work or given the pink slip. Whether this has already happened to you, or you would like to be prepared in case it may, following are some tips that can hopefully give you some ideas on how to find a new balance and prepare for change.
1. Keep track of your expenses. When starting to pare down your finances, you will want to take a good look at everything you purchase. I suggest writing everything down for at least a week, a month is better, to see where your money is going. You can carry a notebook or scrap paper or if you don't use cash, then tally up the money you spent at the end of each week. Most people are surprised at how much is dolled out for extra things on a regular basis.
2. Cutting expenses. This idea we will explore more in future posts, but giving it considerable thought right now may help to give you a basis to go with. Cutting expenses is something that can be found in almost any area in life. If you would like to start to prepare for the possibility of job loss, an idea is to take the money you would normally spend on 'extras' and put it aside intead of spending. Another idea is to completely leave it alone. Don't even touch it. Leave it right in the bank where it can do a little work for you by earning some interest.
3. Have an emergency savings. Three months is a good basic amount to start with. I think six is better, especially during the economic times now. Why so long? Rarely does it work out that as soon as someone loses their job they find another. Usually it takes a few weeks to a few months to find new employment. Then, it will take two to four weeks after that to get a first paycheck even. And time can go by really fast when one has to make their next payment for something with no money availabe. You will want enough for your mortgage/rent, insurances, electric, phone, heat, food, gas, clothing, education, debt reduction payments, and any additional usual expenses. You may also want to have some money set aside for health care if you will not be able to carry over health insurance while unemployed.
4. Pay off debts. For most people this is something that cannot just be done right away, which is why the debt is there in the first place. If it is possible though, double your payments or try to get the balances down as quickly as possible. If you have no income coming in later then you won't be able to pay anything at all and dealing with credit or collection agencies is an awful stress that no one wants to deal with, especially if you are under major financial stress.
5. Extra emergency fund. Cash. This money should be kept in an emergency evaucation bag. Depending on your own family priorities, this can go at the top of your list, or at the bottom. The amount is also completely up to you, though I do recommend keeping the total in smaller sized bills. When planning for this amount there are a few things to consider. How much gas will it take to get to your emergency evacuation destination if you can drive? How up to date are your evacuation bags and 72 Hour Kits? Will you need to quickly purchase the things that go in them if an emergency should arrise or are they complete? Do you want to have money for emergency hotel stays?
6. Resume. When was the last time you updated your resume? Now is as good as time as any and it is better to be prepared in advance. If the time comes that you or your spouse need to start job searching you want to be prepared in advance so you can start as soon as possible.
7. Network and job search. If it is inevitable and just a matter of time before someone loses their job, it is a good idea to do some advance job searching. Networking with absolutely everyone possible in related fields is a fantastic way of finding a new job in advance. If people can put a face to a name or know who you are, they are more likely to recommend you for a position. Keeping your eye open for a potential job lead is important also. Passing on that newly updated resume or filling out applications is also a good way to spend some extra time before known job loss.
8. Consider a new career. If your area is known for now laying off people at each company who are in your same career bracket, you might want to consider changing jobs. This may involve a new degree or just possibly finding new areas that you are qualified in.
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