Financial Safety Net: Planning for the Job Loss

February 16, 2024

Job markets can change a lot. New technology, money issues, industry shifts, companies joining together, and more can make companies let people go fast. Even workers who have been at a company for many years and feel they won’t lose their job may be out of work suddenly.

For example, during the 2008 recession, jobless rates went up sharply as many companies had to get smaller. Even now, with fairly low joblessness, some industries are doing worse while others grow quickly. Recent layoffs in mortgage and real estate show how quickly job safety can disappear.

With so much instability, it’s important to be ready financially if you lose your job. Having enough savings and being ready to lower spending is smart, even when you feel steady financially.

Recommended Financial Safety Net Components

 

ComponentDescription
Emergency FundSavings to cover 3-6 months of living expenses
Health InsuranceCoverage to protect against high medical costs
Life InsuranceSupport for dependents in case of untimely death
Disability InsuranceIncome protection in case of temporary or permanent disability
Unemployment InsuranceTemporary income support during unemployment
Debt Reduction PlanStrategy to minimise debt obligations

1.  Taking Early Steps

The best approach is to get ready early for losing your job before it takes place.

  • Save up a 3-6 month emergency fund if possible.
  • Keep your resume updated and network in case you suddenly need a new job.
  • Live frugally and avoid unnecessary debt so you can better adjust spending during joblessness.
  • Look into other ways to get funds if needed, like community programs, personal loans from family/friends, or online lenders.
  • Understand the process for claiming jobless benefits, budgeting, and reducing expenses.

2.  Special Funding

Losing a job can be devastating financially if you don’t have savings to fall back on. Regular expenses like rent and utilities don’t stop just because you lost your income source. But when unemployed, getting approved for loans that could help cover costs in the short term can be extremely difficult.

Traditional lenders are usually hesitant to lend to those without steady jobs. This is where online direct lenders can help. Are you on benefits and need a loan today from a direct lender? Though not ideal for long-term use, their quick loan products may provide needed funds until new employment is found.

3.  Reducing Expenses and Increasing Savings

While losing a job can be out of your control, getting money-wise does not have to be. Taking early steps will help you handle any potential job loss and short time without work with more certainty and backup plans. The more prepared you are, the less harmful your job’s ups and downs will be.

When facing potential job loss, minimising expenses and boosting savings is important. Carefully review spending to pinpoint non-essential costs that can be reduced or eliminated. Cable packages, unused gym memberships, etc., are good candidates to cut back.

On the savings side, set specific, realistic goals for building your emergency fund over time. Trying to amass 6 months of expenses all at once can be overwhelming. Instead, aim to sock away a certain amount consistently each pay period.

4. Exploring Alternative Income Streams

Generating supplemental income now can also buffer against lost earnings later. Tap into any underutilised skills, knowledge bases or assets you have to create side hustles. Those with creative talents can sell handmade crafts, artwork or designs online.

If you have specialised expertise in a field, offer consulting services nights or weekends. Freelance writers can pitch articles to blogs and websites during spare hours.

Driving for a rideshare or food delivery service allows setting your own flexible schedule. Renting out a driveway, spare room or backyard space creates passive rental income.

Pet sitting, providing childcare, etc., are other easy ways to earn extra money by serving community needs. Teaching classes online on topics you know well is now quite feasible.

With some diligent research and creativity, multiple income streams can be generated. Having backup funds already coming in makes it less stressful if your main income source disappears.

Explore options within your means and abilities. Any earnings beyond regular budget needs can go straight into savings as a job loss cushion.

5. Investing in Yourself: Skills and Education

Job markets go up and down quickly these days. New technology and money issues make companies change fast. Even long-time workers can suddenly lose their jobs through no fault.

It’s wise always to be prepared if you do lose your job. Have some savings built up to tap into. Keep your skills and resume fresh. Be ready to cut back on spending if needed.

6.  Getting Funds When Unemployed

Losing your income can be very difficult. Regular bills don’t stop just because you lost your job. Things like rent and groceries still need to be paid every month.

It’s very hard to get loans without a steady job, even if you have good credit. Banks don’t want to lend to those without income. This is when loans in 15 minutes from direct lenders can be helpful. Their quick loan products provide funds until new work is found.

7. Building Your Skills While Working

Taking classes, reading books, and learning new skills helps you stay employed. When industries change, having up-to-date abilities lets you switch jobs more easily.

Public libraries, community colleges, YouTube videos, and professional groups offer low-cost or free ways to gain expertise while working. Add to your skills steadily throughout your career.

Having a wide mix of abilities gives you options if laid off. It’s much easier to find work again if your skills are in demand. Keep learning and adding to your knowledge.

 Conclusion

When job loss happens, it can be hard emotionally and money-wise if you aren’t ready. First, there is the shock and upset of losing the regular income and routine that a job provides. Then, money challenges pile up fast if you lack savings and ways to pay expenses.

Bills like rent, power, car payments, and food do not stop just because you lost your job. Even with severance pay or jobless benefits, making ends meet is hard.

Meanwhile, new income sources can be very tough to find without a steady job. Most lenders are reluctant to provide jobless personal loans or other financing. Even with good credit, it is tough to qualify for low-interest loans that could bridge the income gap. So be careful and plan properly!

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