Are You Financially Prepared For Job Loss or Salary Reduction?

Imagine the following scenario: You are living a comfortable, middle-class lifestyle when all of a sudden, the company you work for is bought out and your entire department is eliminated. What do you do? I am guessing the first thing on your list after sharing your anger is to refine your resume. Next, you might head to the unemployment office. Suppose now that you are 2 months into unemployment and your emergency savings are gone, what next?

Ideally, that last stage would not happen because you either quickly procure another job, or, you would have a large sum of money saved up to help get you through rough spots. However, saving is not the only part of the equation when it comes to preventing financial disaster. Another important aspect is to minimize spending in the first place. I recognize it has almost become part of the American way to borrow in order to have what you want today instead of waiting until you have the money saved up. A much better plan though is to focus more on financial security and reduce your fixed and variable expenses as much as possible. As an added bonus, reduced expenses will definitely make an emergency fund last much longer.

Avoiding Pitfalls and Staying Out of Debt

Even if you don’t lose your job, the ease of obtaining credit makes it easy to end up in over your head financially. There is nobody looking out for you to say ‘hey, wait a minute, you have already spent way too much this month, you have to cut back’. Therefore, you have to be the angel on your own shoulder watching out for yourself. One idea is to take a look at your credit card bill or expense receipts each month to see what you spend on the most, and then attack that expense. For instance, let’s say eating out is your biggest expense each month. Evaluate why you eat out so much. Is it because you love fast food and you are tempted to pull over and grab a burger when you are out and about? If that is the case, then make sure you are full when you run errands so you aren’t tempted to eat another meal. Maybe your life is so busy that you feel eating out is your only option. Then consider either simplifying your life and cutting back on some of your commitments. Or, pack food ahead of time and keep it in a cooler to be eaten at mealtime. In essence, recognize that there are other options besides eating outside of the home. It might not be as fun, but it is a lot healthier and cheaper.

That is just one example of an expense that can be reduced with some creativity and a little bit of work. There are a million different expenses that can creep up on you and cause long-term pain if you don’t pay your credit card bill every month or spend unwisely. Fact is, if you are not paying your credit card bill off every month, then you should not be using a credit card at all, period.

Debt is not limited only to credit cards though. As you know, many people get in over their head with their homes too. Some people have gotten into trouble because they bought another home before selling their current house. During a seller’s market, people were able to get away with buying a home before selling because there was a very good chance their current home would sell quickly. However, that is definitely not the case right now, and buying a home while holding a current mortgage is a very risky proposition.

There are options out there if your home needs to be sold besides hosting an open house and throwing some refrigerated cookie dough in the oven to entice buyers. For example, a company like Gateway Homes can come out, evaluate the home, and offer a price for the house. Also, if your house is not selling, you can consider having an outside party come in and stage the home to make it more appealing and draw in traffic. There are creative answers for resolving financial problems, you might just have to think outside the box instead of only relying on traditional methods.

In a perfect world, you wouldn’t have too much debt in the first place. If you remember to spend like you are on a limited budget even in good times, then hopefully you will be better prepared for the bad times, if they ever happen .