Do you have a Plan B in place if you were to lose your job? Last year a friend of mine lost his job of 10 years when the owner sold the company and the buyer stripped it down and laid off 95% of the employees. It took him 7 months to find a job, and the only job he could find was outside of his normal career field. It was very eye opening experience, and I know he is not alone.
His experience got me thinking more about our financial fallback plan. For better or worse, here it is:
Our Financial Fallback Plan
Big changes coming for our financial situation. Before I talk about our fallback plan, I need to explain where we are financially. Right now my wife and I are going through a huge life change – we are expecting our first child. This is an exciting time for us, and even though the economy is bad, we have decided it will be best if my wife quits her job to be a stay at home mom.
We have been planning for this for a long time now. First, we made some changes in our employment situation that resulted in less income, but a better quality of life. We prepared for almost a year to reach that point, then it was another year before we were expecting our first child.
During that time, almost two years, I started a blog which earns some side income, we eliminated all debt outside of our mortgage and we have been living on only one salary. The rest of the money we earned went into our retirement accounts and into cash savings. We have over a year’s worth of savings set aside, so I’m not worried about the short term.
What’s the long term financial outlook? Long term, things could be different. After we have our first child, I will be the sole earner for our family. I have a job as a government contractor that is fairly secure and that pays fairly well. In addition, I have a few websites and other online interests with which I earn a fair amount of money (but not full-time income for a family of 3). As long as things continue like this, then I am confident we will be fine. However, in our economy, we all know that things can change in the blink of an eye.
How I would deal with unemployment
Worst case scenario – unexpected job loss. The worst case scenario would be that I would unexpectedly lose my job. Once my wife resigns from her job in a couple months, we will rely on my job as our main source of income and for our benefits. Health insurance is expensive, and COBRA coverage would likely be our best option – and would probably cost around $1,000 per month. Health insurance coverage is a big reason why losing your job is such a bad situation – your fixed costs spike while your income drops.
File for unemployment. The first thing you should do when you lose your job is file for unemployment. Except I can’t file for unemployment because I earn money from my small business. That isn’t an option for me, so that means I will need to start looking for a job immediately and tap into my professional network.
Our fallback plan. Our fallback plan calls for me look for a full-time job and hopefully doing job interviews while continuing to work on my small business and looking for ways to increase revenues. As I mentioned earlier, we have a large emergency fund. But if our savings dwindled too low my wife could always go back to work and I could stay at home and raise our child while continuing to earn money from my small business. My wife works in the nursing field, and nurses are almost always in demand, so we feel fairly confident that we would be able to get by.
We are financially secure – for now
My wife and I feel confident about our current financial situation, but we are well aware that things could change quickly. We live in an area that has been hard hit by the recent economic slowdown and it probably won’t get better anytime soon for a lot of people. This financial crisis has made us both aware of how important our emergency fund is and how important it is to budget and have a financial plan.
What is your financial fallback plan?