[Article republished from “Mondays with Mike – 1/29/18” email newsletter ==> Subscribe to get weekly newsletter in your inbox plus FREE REPORT]
And then it happened…
Mom passed away. Dad’s health was declining. Trips to the doctor constant.
How am I going to handle all this with a demanding job that also requires my constant attention? As a business owner and manager, how can I keep juggling it all before something breaks?
And so I decided. I’m resigning and going to focus on taking care of Dad. Family first.
That is the decision a friend of mine had to make.
It was a tough choice as they had a thriving business and life was good.
But life often has different plans in store.
Luckily this friend had prepared financially and was able to take this often scary leap to focusing on family without having to overly worry about the financial side. His wife was making enough to support the family along with savings.
They would survive until he could sort out his next steps.
How about you?
Could you do it?
Or are you just struggling paycheck to paycheck trying to make ends meet? What would happen if you lost your job?
What would happen if one of life’s little (or big) challenges hit?
What would you do?
Here’s the thing.
It isn’t a question of IF this is going to happen to you. It is a question of WHEN.
What are some of these life derailleurs that have big financial impacts?
Consider some of these…
- Job Loss
- Economic Downturn
- Company goes Bankrupt
- Company Loses Market Share and Downsizes
- Technology changes that make your job replaceable
- Age Discrimination (becoming less marketable)
- Health (yours or that of a loved one that requires your intervention)
- Divorce or Marital Strife
- Tight Finances Requiring a second job or new job or non-working spouse having to go to work
- Burnout (just can’t do the job any longer)
So what do you do when these things happen?
Here are the key areas you need to look at to be prepared.
How’s Your Savings?
Financial talk show host Dave Ramsay talks about the Emergency Fund – having 3-6 months of savings in case of a disaster.
That is a great start but if you’re nearing the middle of your career or later you need a lot more. Here’s why.
At that point if you lose your job you either need to find a new job in the same industry, start in a new industry, or retire on your savings.
New Job, Same Industry
If you look for a new job in the same industry, your reputation (assuming it is good) and network (assuming you’ve developed one) should give you a leg up on job opportunities. However if either of those are not in place, or you’re out of work for more than a couple months (average is 8 months) or you had a role that was a high level role that isn’t readily available in the market, you could be in trouble. And 3-6 months really isn’t going to save you. And you’ll find yourself having to downsize your house and cutting spending to the bone to survive.
New Job, New Industry
So what about starting in a new industry? That is even uglier since you don’t have connections (8 of 10 jobs are landed that way) and you don’t have industry knowledge (that is what businesses pay more for in managers and execs ). So you’d likely have to take a significant step backwards in role and pay and that is if you could land a job at all, since few people want to take a risk on an overqualified hire who’s likely to leave as soon as they can land a job in their original industry.
Retire
Retire? If you planned well then do it. Maybe with consulting on the side to ease into it. But if you didn’t plan well then this is out the window.
So those situations look pretty scary. What can you do to better prepare?
Here are some things you can do.
Give Yourself Breathing Room
First is to create a better nest egg. Get it to one year of expenses. You do that by creating an income to expense gap that allows you to boost your savings from every paycheck.
Figure out first what you can cut out to create that savings. Here are some things you might look at.
- Bring your lunch – $7 X 5 days X 50 weeks ==> $1,750
- Eat home for dinner – 2 days out a week X $35/meal for family X 50 weeks ==> $3,500
- Make coffee at home – $3 X 5 X 50 ==> $750
- Cut the cable – $100/mo X 12 ==> 1,250
- Shop your insurance (car and homeowners) ==> $500
- Shop for groceries with a list (especially at Costco) $100/week X 50 weeks ==> $5,000
- Total Savings just from these ==> $12,750
Now that is a great start. But if you want to pour some rocket fuel on to gain ground even faster (or if you must have your NFL Sports Network) then consider the side job, freelance work, side hustle, Uber/Lyft, etc.
Doing that you could easily add another $200 to $2,000 a month that can go straight into your savings (minus a little for taxes and other incidentals).
Do that and now you’ve got $15,000 to $35,000 a year to boost your savings with.
The side benefit of that is it also gives you something to fall back on (especially if it is freelancing or a side hustle business you could make a full time income with pretty quickly if you lost your job).
That is peace of mind.
So where are you now? What do you need to do next?
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