Saving, Investing, and Personal Finance – 6 Month Savings Fund and Alternate Career Plan
Are you worried about possible unemployment? You cannot prevent a layoff, but you can reduce the likelihood, and you can prepare. That preparation can put your life under your control, but it will take time and patience. It all starts with understanding your fate is up to you. This is the one of a series of articles for those new to saving, investing, and personal finance.
It is a bad economy. Companies are moving operations overseas, or are making do with fewer people. That means layoffs. Some of those jobs are never coming back. The general consensus is that the days of starting with one company and remaining there until retirement are long past. Industries change; companies adapt, and sometimes disappear. The government is spending more than it takes in, and there is always the chance of reduced or eliminated benefits. People have to be prepared to cope with that.
If you're one of the many that have already lost your job, my heart goes out to you. Your situation is not impossible, you are not alone, you can rebuild, but that is beyond the scope of this article.
No one can predict with certainty what will happen. But, we all know layoffs and organizational changes do happen. Anyone who didn't know this before should know it now.
Why wait and risk being caught short? If you are in a position to help yourself now you will have more control over your own life, will be less dependent on others and that itself becomes another less worry.
Most financial planners will tell you a good rule of thumb is to have a 6 month savings fund and many career advisors also advise people to have an alternate career plan.
Early in my career, I'd heard the best strategy is to always begin preparing for the next job the instant you've accepted your current job. They meant to consider a current job the foundation, not the end point. Most people will have career changes. They may make the changes or they may have the changes thrust on them.
Jobs only exist where there is demand. Demand changes so it is best to never become complacent. No one can predict the future. But what is the trade press consensus on the outlook for your industry, for your company, and for your skills? Is demand increasing or decreasing? Do you need to upgrade existing skills, or learn completely new ones? Even if demand is increasing now, it can change, so it is best to have a backup in case it does. Developing your skills where demand is increasing will increase your marketability. That marketability can lead to advancement and give you a fallback in case your current position was to be eliminated.
The 6 month savings fund is there because there are no guarantees. Your alternate plan may fail or there may be some issue with unemployment income. Historically, most people find jobs in 3-6 months. But, that assumes a decent economy, under current conditions it might take longer. That argues for being more prepared. The actual 6 month savings fund dollar amount depends on your situation. Use your records to look at all your expenses over the past few years. Now, look at what you would forego if you were laid off. Is there any reason to assume the expenses won't be the same this year? Take the remainder and average them. Now you know on average, how much you have spent annually.
You may not want to prepare for another career, or be able to save a full 6 month savings fund. It really is up to you, do you want to take control of your own life or wait and let things happen to you?
A 6 month savings fund and alternate career plan will help you to take control of your own future. You'll have a second career option, which provides some safety, and knowing you have money in the bank to cover a loss of job means it's less likely you'll be at the mercy of others.
A 6 month savings fund and alternate career plan are two of many steps in getting to a better point in financial life. It all starts with understanding your fate is up to you.
Individual Initiative is not an investment service. The information provided is intended to assist you by providing one of many sets of ideas about savings, investing, and personal finance. You should consult many resources to gather many ideas, then use only the ones that you believe will work best for your specific situation. This website contains a comment area. Comments made are those of the contributor and may not reflect the views of Individual Initiative. All investments include risk, including loss of principal. You should be certain you understand both the risks and benefits of any investment or investment strategy before investing.