Job Loss Protection: An Emergency Plan

In these tough financial times, people who would generally not have to fear job loss are waking up each day wondering, am I next? This includes teachers, firefighters, police officers, government workers, in addition to anyone who works for a for-profit private company.

I like to read about Stoicism, and one of the main tenets of the Stoic philosophy is regular visualization of bad things that could happen in your life. If you love your wife, you should imagine how it would feel if she were to die, or to lose her. If you have a nice home, you should imagine it burning down.

This is because the negative visualization prepares you for the worst, and helps you appreciate what it is you do have. Rather than obsessing about the things you desire in life, reflect on what you do have, and how you would feel if you lost it.

Your job (and job loss) should be no different.

With that in mind, it can only help you to put a job loss emergency plan down on paper. This will allow us not only to appreciate our current job (or employment), but will prepare us for the likelihood that we won’t be working there forever, and that our departure may be sudden.

How To Get Started

If you are a two-income household, you might start with devising an action plan if the primary breadwinner experiences job loss. Once that is in place, you can modify it to suit a scenario if the person who makes less were to lose their job. I’m not sure how adequately we could plan for a two-jobs-lost-at-once scenario, other than it would probably involve moving back in with parents and begging.

So before we get too far ahead, let’s brainstorm some actions we would consider taking if we experienced a sudden job loss and a significant loss of income. Just write down everything that could be an option to create new income or free up current spending. We will worry about their efficacy and value when we go to plug them into our plans.

Here are some job loss prevention ideas to get you started…

 

INSTANT MONEY SAVERS IN CASE OF JOB LOSS:

  • Cancel unneeded subscriptions (magazines, wine of the month, gym, cable, home phone)
  • Cancel childcare
  • Cancel planned vacations or purchases you’ve been saving for
  • Sell items on Craigslist, eBay, or have a yard sale
  • Sell an unneeded vehicle
  • Downgrade vehicle insurance
  • Move children to public school
  • Rent a spare room out if you have one
  • Sell your house
  • Donate plasma or “other” fluids
  • Max out credit cards (if you need to eat, this should be an option)
  • Radically downsize grocery budget
  • Sell stocks, precious metals and other equities (might want to wait on this)
  • Tap your 401k or retirement (it’s an emergency, remember)

What you will notice from the above list is that, for the most part, these are tough, emotional choices. Things like selling homes, moving your kids to a new school, or tapping your retirement savings. This goes to show how serious a situation you are facing, and how important it is to prepare in advance for job loss.

Now that you have a solid list of money savers in case of job loss, it’s time to divide them into multiple groups: things to do immediately, and things to do one, two or six months down the road if unemployment persists. The reason for doing this is to prevent you from panicking and doing everything at once. Child care, for example, might be something you want to preserve for a month or two if you plan to look for a new job.

Also, selling one of your vehicles might be something you shouldn’t be in a huge hurry to do.

What to Do Before Job Loss

Now before we finish, let’s take a look at some things we can do BEFORE we find ourselves facing a job loss. Some of these will be easier than others, but I think you will find them to be valuable.

  • Make a Job Loss Emergency Plan (like this one)
  • Save $1000 (at least) in an emergency fund
  • If you are debt free, beef up your emergency fund to 6-12 months living expenses
  • Calculate how much it would cost to get by on one income
  • Update your resume
  • Make a list of key contacts who can help you find a new job

Some of you may not think it is healthy to visualize being fired, but for some, it is impossible not to think about. If you are like me and refuse to sell your soul for your job, you run the risk of appearing less attractive than someone who is willing to do so. If you work in an industry known for volatility, maybe a sector hit hard by the economic downturn, it would serve you well to have something to refer back to when you aren’t thinking clearly, to let you know how to proceed.

A Job Loss Emergency Plan is a great way to keep you sane, focused, and help you have a clear mind to take only the important actions that are needed to make things right again.

Do you have a job loss emergency plan?

 

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42 Comments
  1. Even with the slave wages, I think we could make more money with a couple hour’s more writing/blogging every day than selling plasma.
    101 Centavos recently posted..“Making Money”, plus Four Other Not-Your-Usual Personal Finance BooksMy Profile

  2. I like the concept of preparedness, and I think it runs along similar lines to your stoic argument here. It’s prudent to plan for contingencies.
    Hunter – Financially Consumed recently posted..The Best Car I Ever OwnedMy Profile

  3. My husband and I have diversified our skill set to be apply to more than one job in case of job loss. Knowing you have multiple options can feel a bit more secure, but there are no guarantees in this economy.
    Andi @ MealPlanRescue recently posted..Thank God for New CookwareMy Profile

  4. My husband works in what we think is a “recession-proof” industry (law enforcement), yet I still have a job loss plan. We consider things like cable TV, a gym membership, my daughter’s dance classes to be a luxury, not a necessity – and they’d be the first to go!
    Elizabeth @ Broke Professionals recently posted..Simple Home Maintenance Anyone Can DoMy Profile

  5. Thanks for reading, Elizabeth. It’s a shame when police officers have to worry about their jobs for reasons other than catching all the bad guys. Scary to think about, but important.
    John recently posted..Best Personal Finance Writing – Week 4My Profile

  6. We should have a job-loss plan, but we don’t. I guess I’ll add that to my big list of stuff I should do. ;-) I really like all your ideas about what to do before and after.
    Jen @ Master the Art of Saving recently posted..The Downside of Using Credit Cards ResponsiblyMy Profile

  7. Great idea here John. Some of the stuff you put in the first list I probably wouldn’t consider unless one of my family members was battling a life-threatening disease! Wow!

    For me, this is the beauty of being a trucker. If I lose the job I have today, I can go get another one tomorrow. Albeit, maybe not as good as the one I have, but companies are ALWAYS looking to hire more drivers. If I lost my job due to some sort of physical or health issue, I have both long-term and short-term disability insurance in place. That is another thing folks should consider.
    Matt recently posted..Creating Income From a Dying Profession, The Stay-At-Home-MomMy Profile

    • I would like to drive a truck, but I don’t know if I have the vehicle and driving experience. Seems like a cool lifestyle (my father in law drives).

  8. I’ve always considered my vacation when the jobs start to get scarce. I saved up vacation time at work ( and still like to carry a hefty balance when I can) as I consider this a severance package to myself. Now, not every employer lets you have a large outstanding vacation balance or they require that you use it every year. But those that do let you accumulate vacation, it really does act like an emergency fund. It always pays to have a plan B. And usually a plan C too. :)
    CultOfMoney recently posted..Why Coupons, Promo codes, and Extreme Couponing are DoomedMy Profile

    • Definitely. My job allow me to sell back up to 20 vacation days at my daily salary rate, which is a good chunk of money. I would also get my pension contributions back because I’m not vested. Thanks for reading.

  9. Great post! There are so many things that we could cut back on.

  10. I’m not married, so my plan is to a) not lose my job :) b) get out of debt, and c) build an emergency fund.

    Oh, and add additional revenue streams.
    frugalportland recently posted..Finding a new credit card: step twoMy Profile

  11. Definitely a great exercise…but a bit of a downer:).

    Three years ago when my husband was my boyfriend, we were both laid off within 2 weeks of one another. It does happen!

    I also keep an excel sheet of how our budget would look if one of us lost our jobs.
    Amanda L Grossman recently posted..The Zero Sum Financial Game: Ideas to Help You Juggle the MonthMy Profile

  12. John,

    I think your list of instant money savers is really strong and would make a strong article on its own about how to downsize expenses.

    As to the preparations, I think many, many people are too afraid to imagine this type of scenario and plan ahead. I know someone who after losing his job was so incapable of downsizing he maxed out his credit cards while lying to his spouse and pretending to go to work.
    Jeff recently posted..Are Credit Card Rewards and Frequent Flyer Miles Taxable?My Profile

  13. How about get a part time job delivering pizza or something like that?
    I would recommend building more income streams to cushion the job loss.
    retirebyforty recently posted..Amazon Gift Card February GiveawayMy Profile

  14. I couldn’t get past the, “imagine if your wife were to die” without bawling my eyes out. Thanks a lot…

    Haha. Great article though, I am a big fan of building an emergency fund in a simple savings account. Thanks for the tips!

  15. I’ve put some thought into this kind of plan. It’s a good idea to calculate what your burn rate is and how long you will last without a job. If you are getting your finances in order and improving them, you will be able to last longer without a job as time goes on. Here’s a simple example that I’ve used for my finances that goes into numbers.

    Monthly Expenses:
    Rent: 1500
    Groceries: 300
    Utilities: 200
    Car Payment: 250

    Income: 4000
    Savings: 25,000

    Using these numbers, burn rate is 2,250. If I lost my job I would expect to get about 1,000/month unemployment for 6 months. The savings would only last about 13 months. This is not bad because I didn’t consider adjusting any expenses which I would do under this circumstance.
    Six Figure Investor recently posted..Mind Your CUSIPs!My Profile

    • Thanks 6 Figures. My thinking exactly about getting finances in order. That’s one of the reasons I want to be debt free (minus house), so that I have the flexibility to take on new situations, whether voluntarily or involuntarily imposed. Thanks for reading.

  16. This is a great post. If the financial crisis taught us anything, it’s that anyone can lose their job in a bad economy no matter what level. Even a corporate executive can benefit from formalizing a plan like below. Just in case.
    BE @ BusyExecutiveMoneyBlog recently posted..My valuable credit card lessonMy Profile

    • Thanks for stopping by, BE! I agree. Even if you own the company you aren’t safe. It’s not worth it to be 100% dependent on others.

  17. A little late to the party but I wanted to point out two flaws in this list of things to get rid of. 1. the child care and 2. the grocery bill.

    Here’s why. If the kids are in child care, completely changing their (and your) routine to have them at home causes increased stress and confusion. And you won’t have the time to look for work. Instead, go part-time or work out a payment plan with the provider if you can.

    On the food bill – one of the worst things you could do when unemployed is sacrifice health. Food, is part of health. Now, you can re-evaluate the grocery bill so you get a more healthy diet. But chopping it down might bring on more stress and depression since the first thing into the mind is “I can’t afford food even”.

    Other than that, I can see your point.

    • I agree and recommend that you try to maintain childcare, at least for a month or two (or grandma!) so that you can focus on what’s best for the family.

  18. What about ask your parents to give you some money in case of loosing the job
    Alexander Collins recently posted..Forex vs. FuturesMy Profile

    • That is on my list in my head. I’d probably ask them if I could move back in instead!

  19. I’m really late on this comment (in my defense I am new to this site), but I definitely wanted to add something else that can help. My husband and I both work but we live on just one salary, so that the other salary goes into savings (or extra student loan payments). This way if one of us looses our job we don’t change our lifestyle. I realize this may not be feasible but if you make small changes gradually you’d be surprised on what you can live well on, and you get peace of mind that if you loose your job it’s not an emergency.

    • Thanks for dropping by and weighing in. This is what I’m talking about, taking defensive steps to guard against job loss. We are now at the point where my wife’s take home pay goes completely to debt payoff, so when that’s done, we will be able to live off one paycheck, as we are technically doing now.

      Thanks again!

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