#JobSearch : Preparing Your Finances for a Job Loss. Many People Have an “Out of Sight, Out of Mind” Mentality.

Due to its very nature, job loss is something many people try to avoid thinking about. It’s a stressful situation, and many people have an “out of sight, out of mind” mentality for it. But this doesn’t stop it from becoming an ever-present fear in working-class America.

A global pandemic, shifts in the job market, economy, and even within one’s own company can lend itself to thoughts of “What if I lose this job?” This is especially difficult at a time when more and more jobs are becoming automated or being outsourced to freelancers and other firms.

Fortunately, the fear of job loss can be mitigated by preparing for it well in advance of losing one’s job. There are some great ways to create a safety net early in your career for a time when you might not be working. 

Build an Emergency Fund

An emergency fund is a type of savings account, usually with a few thousand dollars in it for a car repair or medical expense. While these are all great reasons for having one, an emergency fund has a lot of added value when it is created as a way to prepare for job loss.

Depending on your situation, unemployment can last a few months to as long as a year. This means that to be prepared, you should save up enough money to be able to live comfortably for up to a year, while you search for your next job.

It sounds like a scary thought, but you can determine this by calculating your average monthly expenses, and then multiplying that by the number of months you want to be prepared for. For example, if your average monthly expenses total about $2,000, you’ll want to have at least $12,000 set aside in an emergency fund, enough to get you through about six months of job loss. However, if you’re looking to be prepared for a year-long period, you would need about $24,000 set aside for job loss.

While the total amount needed may seem daunting, preparing can be made easy by putting aside a certain percentage of your income from every paycheck into a bank account with no fees, allowing you to hold onto everything you save. Avoid withdrawing any money from this account unless absolutely necessary, as this will act as a fixed income source in the event you lose your job.

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Have Multiple Sources of Income

Unemployment can become a lot less stressful if you have multiple sources of income, as they offer a great fall back. (They also have the added benefit of making wage negotiations much easier and less stressful.) There are two types of income to take into account when discussing ways to generate money on the side: active and passive income.

Active income is any type of secondary job or side hustle you might have. I’m a huge fan of the side gig. If you have been considering starting your own small business or taking on an evening or weekend job like consulting or project management–or even ridesharing, consider it as a safety net for potential job loss. Passive income involves making investments, either real estate or dividend stock investments, that produce income on a monthly or quarterly basis. These require less work but more upfront costs than a side hustle, due to the fact that they require an initial investment cost. 

Networking and Personal Branding

Finally, you can make the process of finding a job faster by building strong career relationships. Networking gives you the opportunity to have people to rely on when switching careers for references, and may even be the push you need to find your next gig. Remember to spend time socializing in a professional and productive manner on LinkedIn so that you build a great network of people at your job. These relationships can give you a sense of security, and even make it less likely that you’ll lose your current job.

Consider building your personal brand on websites like LinkedIn that allow you to put a heavy focus on your career successes. Spend time writing well thought out posts about the industry you work in, and share other people’s content as well. This will be a great fallback to reference when looking for a job, as most employers look at social media profiles before hiring.

At the end of the day, job loss is a scary prospect, but the harm that comes from it can be mitigated by spending the time to create a safety net for yourself. This allows you to spend more time focusing on your current career, which in turn makes the risk of job loss far less likely.

FSC Career Blog Author:  Ms. Erin Kennedy, MCD, CMRW, CPRW, CERW, CEMC, is a Certified Professional Resume Writer/Career Consultant, and the President of Professional Resume Services, named one of Forbes “Top 100 Career Websites”. Considered an influencer, she is consistently listed as a “Top Career Expert to Follow” on Twitter and LinkedIn.

FSC Career Blog | July 13, 2020