7 strategies to prepare for an impending change in your finances:
1. Revisit Your Budget
If you’re facing a job loss, you need to plan your household budget immediately. If your current budget was written with two incomes in mind, go through and analyze your goals now considering one income.
Trim as much as possible from your spending. Look at cable TV, internet, cell/home phone plans, insurance, and any other monthly expenses to see what you can reduce or eliminate. You can usually save money by lowering the quality of your plans. For instance, reduce your cell phone’s monthly minutes, raise your insurance deductibles, or lower your Internet bandwidth for a lower monthly fee. You can even cancel cable/satellite and watch free internet TV.
Consider selling 1 vehicle, renting out a room in your home, selling your home altogether and downsizing, refinancing for a lower rate, take your kids out of professional child care to be cared for at home, etc.
2. Pad Your Emergency Fund
Most experts recommend having six months of living expenses socked away in an emergency fund. With today’s economy, it’s smart to have enough for at least eight months. You need to be able to cover rent or mortgage payments, groceries, insurance, gas, and even additional unexpected expenses like car repairs. Starting now, do whatever you can to add money to your emergency fund.
3. Supplement Your Income
Once you’re living on less income, you’ll quickly see that any money you can bring in is helpful.
Start figuring out how you could bring in a bit of extra income working from home. Can you start a small in home business or freelance for someone else?
4. Get Out of Debt
Getting out of debt, especially high-interest debt, should be a top priority before you leave or lose your job. Do whatever you can to pay off your current debt, or transfer high-interest debt to a lower-rate card. Consider finding ways to supplement your income now, while you are still employed, and earmark those extra funds to pay down your debt.
5. Practice
Start living off one income today. Save the other income and see where you can cut cost immediately.
Taking the time to practice before “the real show” can make you feel more comfortable when the time comes, and allows you to work out any kinks or cash flow issues beforehand.
6. Don’t Forget About Retirement
Do you have a retirement plan with your employer? If so, you need to spend some time thinking about what you want to do with it. Many organizations will let you leave it where it is if you have a minimum amount in your account already (usually $5,000 or more). In other cases, you may have to transfer your funds.
Most experts recommend an IRA rollover for retirement. Talk to a financial planner in advance to figure out the best approach for you.
7. Start Networking
Everyone’s situation is going to be different. Some of you will want to try to find a new job immediately. Others will decide to start a business, or even take some time off to pursue a personal dream.
Whatever your plans are, make sure to put your network of friends and colleagues to use, especially when you start looking for a new job. Use Facebook and LinkedIn for networking.
Don’t panic….prepare