Emergency Plan

>> 10.06.2009

Yesterday was a tough day here at my office. Two people I work with were let go due to economy-related issues. My company was actually growing during the recession so I felt secure in my job, but I didn’t take into account the stability of the investors. It turns out that a large amount of funds were removed because of a big investor’s financial problems and my company needed to generate immediate cash flow. This just goes to show that you should never feel immune from a recession in your job.

After I read all of the great points everyone posted on which improvement I should make to my house, I became tempted to dip a bit into my extra savings so that I could do just one more project…. Wow, did I get a wake-up call as to why that would have been an awful idea! In light of everything, this seemed like a good time to review my emergency plan (that I plan on keeping in place!).

In case of layoffs:
*apply for unemployment
*always keep an emergency savings: eight months expenses in cash
*freeze all unnecessary spending- going out to eat, entertainment, etc.
*freeze unnecessary gas use; rely on bicycle for travel
*rent out second bedroom of house
*while employed, never accumulate debt; pay in cash for everything (or pay of card at the end of the month)

My additional back-up plans:
*My company allows us to rollover extra vacation days into sick day accounts. Although vacation time is wonderful, I never use all of my days so that I’ll have them in case of a major illness.
*Buying my house was a major dream of mine, but if I become sick or unemployed for over a year, I’ll either put my home on the market or rent it out so that I can downsize as much as possible.
*Creditors are reducing limits these days and I’ve been using my cards responsibly so that they don’t have any reason to cut down on my limits. As much as I hate being in debt, I know that having a card as a backup might come in handy.
*I'll consider going back to teaching. I left that profession because the lifestyle made me very unhappy, but it is a field in which jobs are always being created and cannot be outsourced or replaced with technology.

What kinds of emergency plans do you have in place?

14 comments:

Jo October 6, 2009 at 10:24 AM  

Thank you for your sweet comment on our desk! :) We enjoyed doing that little DIY project ourselves. What a fun little "To-Do". Good luck with all your "To-Do" stuff, isn't it so much fun? Thank you so much for dropping by the blog!

Sara @ Russet Street Reno October 6, 2009 at 11:26 AM  

You have a great plan. Me and my fiance also have 7 months of my take-home pay stashed in the bank just in case. He works for TJ Maxx (I know I'm so lucky!) so his job is very secure. They are one of the only companies that thrive when the economy gets bad. But either way, we already live pretty frugally and save, pay off credit cards every month, etc...so there isn't much we could cut back on. Probably going out and decorating the house - hopefully I don't have to do that, what would I blog about??

Kate October 6, 2009 at 12:04 PM  

Our plan is pretty much the same as yours. I was actually laid off earlier this year, luckily I found a job right away (I know, rare) so we didn't have to dip into our savings but I was so thankful that we had it. It was a huge relief to know that if I had gone without work for awhile we'd be okay.

Danielle and Clint October 6, 2009 at 12:09 PM  

Ugh...I work for an American automotive company so I know all about layoffs. I have worked here for 3 years and am now the only one left, besides my manager. Clint's work has been making cuts as well.

So Clint and I have always lived scared, until recently. We just started accepting this is the way it will have to be and we can only do what we can. Our home is the only thing we would be scared of losing, but for now, we just keep our fingers crossed and try to cut costs when we can.

I know it's easier said than done, but don't let it scare you too much. Sometimes it's a jobs way of getting rid of "dead weight", also.

chacha October 6, 2009 at 12:15 PM  

Yep, I was laid of in Feb (but was only unemployed for 2 weeks), but my husband was laid off in April and hasn't found anything. So, yeah, one must be responsible with emergency funds.

I have a magic number in my money market account that I have to be at (unless there is an emergency) or else I feel nervous. For me it's 50K. It's more than 10 months of expenses - it's probably overkill but I know at least I'm prepared for the case that both my husband and I are unemployed for an extended period of time.

So, that's my backup plan. I think, realistically, 6 months of expenses is probably enough though. I'm just very risk-averse.

ashley morgan October 6, 2009 at 12:21 PM  

That is a scary wake-up call. But you seem so organized and financially smart, I think you could sail through tough times. Just keep doing what you're doing.

Jenny October 6, 2009 at 2:27 PM  

Excellent post! I've been thinking a lot about this type of situation (my fiance is in-between full time jobs right now) lately. We are still saving a fixed amount towards our emergency fund (since we've only been out of school one year, we're not quite to 6 months in the emergency fund yet), and paying down our debt (mainly student loans).

Since he's in between jobs right now, our "fun fund" is running about $25/month. We also cut back hugely on our grocery budget by foregoing alcohol until after he finds a full time job (we used to enjoy 2-3 bottles of wine per week with dinner, and maybe a 6 pack of beer). We've saved at least $40/week just from that alone.

The other thing is that we agree if either of us doesn't have a full time job, we will work part time while looking for a new one. Right now, my (Ivy league educated) fiance is driving a cab a few nights a week while he interviews during the day for other jobs. If it were me, I would work a few nights as a server in a restaurant (my pre-graduation job). Any job that can keep income coming in is better than none.

Anonymous,  October 6, 2009 at 3:11 PM  

I think everyone is very aware of the economy right now, and probably everyone knows someone that has been laid off. I know I do. I am single and without a partner as backup I am really sensitive to my financial future. I keep an approx 6 month fund, pay off the credit card every month and pay whatever extra I can off my mortgage. As soon as it's paid off... WOO HOO. But .. you got to live and there is always a little for a home project ... even if it is only paint!!!

Jessie October 6, 2009 at 5:05 PM  

It sounds like you have a well thought out emergency plan!

One part of my plan was to do a budget based on employment insurance benefits I would receive if I was laid off.

J & L October 6, 2009 at 5:16 PM  

Yea, I'd definitely just sit tight on all of those home improvement projects (just to be safe). Unless, of course, you have a fairy godmother who gifts it to you, then by all means! ;-).

Good luck - it's a tight economy out there (out of a job myself - boo hiss), but keepin' it real by doing what I can to help out at home.

Good luck! Love the blog! Thanks for the blog love on my site, too!!

LizzieBeth October 6, 2009 at 7:19 PM  

Hey girl, sounds like you have a great plan!

My only thought- I don't know which state you live in, but I know in PA teaching jobs are VERY hard to come by. A lot of my friends have moved to other states in search of jobs. If I may, I would suggest a Plan C for job.

LB

Natalie October 6, 2009 at 11:47 PM  

I don't currently have one, but I am going to get on that! I am thinking I need to get one now!

I'm hosting a giveaway this week.. be sure to check it out!

http://teamimhoff.blogspot.com

Marcy Tate October 7, 2009 at 7:21 AM  

I applaud you for your post and addressing this issue b/c no matter what at the end of the day nobody is secure these days. Your backup plans are good and practical and hopefully none of us will need to use them:)

Kasey at Thrifty Little Blog October 7, 2009 at 10:26 AM  

@Jenny- Wow, you are so disciplined! Many people don't realize that things like alcohol are extras and could be cut out of the budget. I'm not a big drinker, but I'd have to do the same thing with my dessert addiction.

@J&L- Luckily, I filled my emergency fund to the brink before buying my house so the money I would use for the improvements would come out of my house fund. I’ll definitely stick to paying for everything in cash out of the house fund though!

@LizzieBeth- Great point about teaching jobs, I’ve actually heard about the wonderful school systems in PA (and other NE states). Unfortunately, here in TX , the system isn’t so great and the high turnover rate makes it so that there are at least teacher assistant jobs available at all times.
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