We all want to feel secure should something happen such as a layoff; however, we also have other priorities for the income we are earning. The best way to prepare for a layoff is by having emergency savings. But when is enough, enough? The common response is, “you should have three to six months of expenses set aside”. Well (as with most things) I followed that advice…loosely.
It was the summer of 2008 and my husband and I were living the dream: our first home, an 18 month old daughter and another child on the way. We had both been working in our careers for a couple of years and had a little socked away for a rainy day (about enough to cover all of our expenses for 2 months).
One summer day, my husband came home early from work and…you guessed it, he had been laid off. In an instant I realized that we had not saved nearly enough and I began to panic.
So financially, we hunkered down. I started cutting back on what we could and luckily my husband was able to nab his old college job at a local restaurant. It was a big change to go back to working until the wee hours of the morning, but he was willing to do whatever he could to bring in any income. He continued his job search by day and worked in the restaurant at night.
Now what? Even with cut backs and the income from the restaurant we were tapping into savings every month. Months went by, our savings was dwindling and we were getting a little nervous…okay, really nervous.
Finally a break: almost 6 months to the day from when he was laid off he was offered a job! The job was less pay but better benefits and we were relieved - to say the least.
Lesson learned. Because of the cut backs and income from the restaurant job we were able to stretch out our 8 weeks of savings for 6 months, but it was awful and terrifying. Our savings ran out the week my husband got his first paycheck…talk about cutting it close. I am so thankful for what we had set aside, but you never know what could happen. So here are some things I took away from our financial crisis.
• Anything is better than nothing. We didn’t have the suggested amount of emergency savings, but we got by and without what little we had it could have been financial chaos.
• The average period of unemployment is over 40 weeks – so the more savings you have, the better!
• Know your bare bones budget. Should the unexpected happen, know what you can slim down to if needed. This will help you spring into action if the time comes.
• Bring in what income you can. It may not be ideal, but every little bit helps.
Need a little help determining your bare bones budget or how much emergency savings is enough for you? Call LSS at 888.577.2227 to make an appointment with one of our Certified Financial Counselors. Want to get started right now? Click here for ONLINE FINANCIAL COUNSELING. It’s quick, easy, and just as effective as phone or in-person counseling. Time is of the essence with finances so take action today!
Author Ashley Hagelin with LSS Financial Counseling is a Certified Financial Counselor and specializes in Reverse Mortage Counseling.