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Do You Have a Plan for Unemployment?

by Miranda Marquit

You probably do not like to think about losing your job. However, in the current economic environment it is a good idea to be prepared. The most recent release of initial jobless claims underscores this reality. You may have survived with your job so far, but will you survive what’s coming? And if we really do end up in a double dip recession, it means that now is the time to begin preparing. Here are some things to consider as you shore up your finances:

Create a Plan for Unemployment

Do you have an unemployment plan?

Do you have an unemployment plan?

You never know if and when unemployment will strike, and unemployment benefits will only take you so far. The best strategy for dealing with unemployment is a proactive strategy, and these tips can help you plan for the worst.

Emergency Fund

For many, this is a necessity. Your emergency fund can help you through tough times by giving you a place to turn if you need help meeting expenses. Consider how you might build up a financial cushion in the form of an emergency fund by setting aside money each pay check in a high yield savings account.

It is important to realize, though, that any emergency fund is unlikely to last forever. It can help you to get through some of the tough times, and help you pay the bills, but unless you have a huge emergency fund, you are going to need to make some other preparations for unemployment.

Develop Income Diversity

Is all of your income from one place? If so, it might be a good idea to begin developing a little income diversity. Consider starting a side business with a hobby as a basis, or setting up a web site that can generate affiliate income. If you are really worried about the stability of your day job, you or your life partner can consider getting a part-time job of some sort. You can also consider income investing as a way to begin developing a little income diversity. While you may not be making a ton of money from these other sources each month, they can establish income streams that can help cushion you if you lose your regular job. And, as long as you have a job, you can use the extra income to pad your emergency fund!

Live Frugally

The recession has taught many the importance of frugal living. Even those who still have jobs right now should consider downsizing their lifestyles — at least a little bit. Living modestly and within your means will ensure that you have fewer expenses to meet if you lose your job. It means making less of an adjustment in the future, because you are already adapting right now. Additionally, frugal living means that you can set more money aside for the future. Even if you decide that drastically cutting expenses is not necessary at this point, you can still make a list of items to cut so that you are prepared in the event of a job loss.

Keep Yourself Marketable

Keep up to date on the skills you need for your profession. Consider developing new skills that might serve you well if you need to switch jobs. Periodically update your resume, and do what you can to keep yourself valuable to your current employer (so that you have less worry about layoffs). You should also keep your networking contacts fresh. Keeping up with your business and personal relationships while you still have a job can prevent you from scrambling when you become unemployed.

Photo credit: Official GDC


Published or updated December 26, 2012.
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{ 4 comments… read them below or add one }

1 Craig

It’s tough to have a plan, but always have an updated resume just in case.

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2 myfinancialobjectives

I agree with Criag, an updated resume is a must. Some people I work send their resumes out every couple of years just to see if they get any interesting offers’.

I like the diversify income idea as well. I’m working on this right now!

Also if you think you may get laid off relatively soon, it may not be a bad idea to get a part time job to save up some extra cash for that emergency fund.

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3 Jerry Sheehan

Yeah, you should plan on unemployment and for the long haul. If you’re job is miserable and you absolutely hate it there especially if you don’t fit in, you should hope for unemployment benefits and make a strategy such as starting your own small business and working for yourself. These are very difficult times and the workplace these days with the corporate cultures, and office politics, etc., can be a very awful place to be stuck in for long days especially in MA. Plan on going back to school along with collecting benefits, etc., is a great idea. It will give you multiple roads to pursue for which you may not have now. And if you’re in financial distress, this is also a great idea.

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4 basicmoneytips

I agree with this article and even people with a secure job need to develop a plan for unemployment. The emergency fund is a no brainer. The article mentions living frugally but I take it a step further – I say go into survival mode. Don’t eat out, make only minimum payments, cut expenses every place you can. You can read some extreme stories on the internet about people who manage to live on a very small amount of money per month. The issue is most Americans cannot make a shift like that, and continue to expect to live like they always have.

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