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3 Ways to Prepare for Unemployment

photo by Mykl Roventine

Worry not…Mr. FG is currently employed, and Lord willing, he’ll continue to be.

But, almost two years ago, this was not the case.

I never said anything about it here, but in the spring of 2009, we got word that Mr. FG’s company had decided to outsource pretty much their entire IT department to India and a couple of other places (Boo to outsourcing!).

When Mr. FG came home and told me, I worried about it, cried about it, and then a few days later, I was ready to deal with the situation in a more productive manner.

Since a lot of people’s jobs are less than secure in this economy, I thought it would be helpful to share the steps we took to prepare for Mr. FG’s layoff.

We had the blessing of getting some notice before Mr. FG’s job ended, but not everyone does. Given the shaky nature of the economy, though, I highly recommend following some of these steps so that you’ll be prepared for a layoff.

1. We cut our spending in order to increase our emergency fund.

We had something of an emergency fund when we heard of the impending layoff, but not enough for us to feel very comfortable. So, we cut corners in every way possible to free up money for our emergency fund.

We were already living pretty frugally, but there still were things to cut. We cut our discretionary spending back to almost nothing, we didn’t eat out at all, we ate less expensive meals (I tried to spend between $60 and $80 a week then), we canceled our $15/month cable bill, and we didn’t buy new clothes.

2. We looked for side work to increase our emergency fund.

Not only did we cut our expenses, we looked for some ways to temporarily increase our income. I’d only done photography for fun before, but I sent out an advertising email to a local Yahoo! group letting people know that I was available for photo sessions. I took a number of piano-playing jobs for weddings and such. I did quite a bit of childcare that summer too. Mr. FG obviously wasn’t able to do as much as of this as I was, given that he was already working a full-time job, but he did some computer repair work on the side to generate some extra money.

If you don’t happen to have marketable side job skills (though I bet you’ve got something if you look hard enough!), take a look through your house to see what you might be able to sell on Ebay, at a yard sale, or on Craig’s List.

If you don’t have a decent emergency fund, you need to do something to rectify that, so be ruthless (you probably don’t need a lot of that stuff, so sell it!) and creative (Can you do yard work? Deliver pizzas on the side? Babysit? Bake or cook for someone who doesn’t have time? Think about any and all of the skills you’ve got and how you could get paid for using them!).

3. We made up a bare-bones budget.

To get an idea of how far our emergency fund would take us, I drew up a bare-bones, only-the-necessities budget. I gave myself $60/week for groceries, planned to cut Mr. FG’s hair myself, took all the charitable giving out of the budget (when you have no income, tithing is sort of out of the picture!), took out the monthly budgeted savings (again, you can’t contribute to savings accounts when you have no income) and ended up figuring out that we could survive on about $2500/month if we had to.

So, that meant that a $10,000 emergency fund would sustain us for 4 months, even if all of my income sources dried up (which we didn’t think was going to happen. I’m self-employed, and I didn’t plan on outsourcing my job to India!).

The happy ending.

Happily, all of our hard work paid off, and we ended up being able to get more than a 4-month emergency fund set up before Mr. FG’s job ended.

That was a very, very busy summer (thank goodness it was summer because I don’t think I’d have been able to handle all that side work during a school year!), and we lived a somewhat financially deprived life then, but it was totally worth it. Knowing we had a cushion and that we’d be all right for a while if unemployment happened brought us a great degree of mental peace.

We also knew that Mr. FG had the promise of some severance pay if he was unable to find a job in time, so our emergency fund would carry us farther than 4 months.

The even happier ending.

At almost the last minute, Mr. FG got a job interview and offer, and we didn’t even end up needing our emergency fund. This was fabulous news for us (even though it was the start of Mr. FG’s super early schedule) because now we had a nice little emergency fund that could just sit in the bank…yay!

And given the shaky state of the economy, we don’t at all regret the work we put into building our emergency fund. As we learned in 2009, a job that seems steady and sure can be quite the opposite, and it is a lovely feeling to have a backup.

So, what did I leave out? Do you have any great tips for preparing for unemployment?


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Wednesday 30th of March 2011

I always had a problem with the advice of having three to twelve months (depending which financial expert you're listening to) of income saved up for an emergency such as unemployment because of the things you have pointed out--basically, that if I was unemployed I wouldn't be spending as much money (little to no charitable giving, no going out to eat, putting savings on hold). I think your strategy makes a lot more sense where you figure out the bare bones budget and use that as your guide rather than how much money you are currently accustomed to bringing in and trying to maintain that same level of living when you have no idea when further income will start to stream in.


Wednesday 30th of March 2011

Our bare bones is $2500 a month too. How long did it take you to save up a 4 month emergency fund?


Tuesday 29th of March 2011

I enjoyed reading these comments, very inspirational! I do believe too in tithing and my husband and I have for years. Sometimes I look back about 20 years ago, when we tithed on our two incomes, paid child support for my husband's three children (who are now in their late 20's and early 30's), bought a house (albeit an old 'fixer-upper') and had a car payment...and wonder how we made it?! But God is so good...and I firmly believe He stretches things, makes stuff last longer, etc..when we are faithful to give. One story I have is when President Clinton was first sworn into office on his first term in the early 90's, we had a huge wind storm in our area, and our wooden fence around our house blew down. It already was kind of on its last legs, and we knew before the storm we would need to replace it soon, as we had a dog...anyway, the storm blew the fence down, and our insurance company sent an adjuster out...they paid us enough to put a whole new fence up, as well as replace a few shingles that blew off the roof! We always looked at that storm as a blessing from the Lord! Also, a more recent story...I have a bottle of ROC day moisturizer in a pump bottle..I can't see inside the bottle, but every day I use it and pump a few squirts out for moisturizer, and it always feels just as heavy when I pick up the bottle, and there's always plenty that comes out of the bottle when I pump it...I've had it for probably 6 months at least, and I keep thinking that it should have run out a long time ago, but it is almost like the jar of oil the widow used in the Bible that didn't run out for a long time! It is amazing! Anyway, just wanted to share those in God, He takes good care of His kids! Kelly

Rebecca Haughn

Monday 28th of March 2011

Good post, personally tithing is the last thing to go. Sometimes God needs your dedication to show just before he provides. Glad it worked out for you though. Nice it all worked for the good.


Sunday 27th of March 2011

Okay, brilliant women, I need some advice for my situation. I am a law enforcement officer for the state of Ohio and have been notified I will be out of a job by 7/1. The last two years have already been horrendous...divorce, death, illness and near financial ruin. I am a single mom with a pair of teenagers in an $800 per month apartment, lots of student debt and about $20,000 in consumer debt I got saddled with in the divorce. I have no savings except retirement savings that I won't be able to access until 3 months after my job loss. I have been searching for a lower cost housing option, but the lesser rent options are in drug infested neighborhoods. I can't buy another house because my credit took a hit during the divorce. Unemployment will be less than half of my salary and I get only a bit of child support because I earn more than my ex. I plan on going back to school to get my Masters and earn my teaching degree. Is there hope for me?


Monday 28th of March 2011

I'm very sorry to read about your circumstances. I'm sure they must appear to be overwhelming right now. I don't know your exact situation, but as I read over your post, I did think of some suggestions that might be of some help. First of all, determine exactly what you and your two teens will need (not want) to live on after you are laid off. Then try to begin living on that budget now. Like Kristin did, spend no more than you absolutely have to spend. In this way you should be able to put aside something before you lose your job. Secondly, keep looking for cheaper places to live, or any other way to cut expenses. Do you have relatives who could help you here. Moving in with family for a short period of time could be helpful. Do you have things to sell? Sell them and save the money. Is there something extra you could do now to generate more income? Is overtime available, etc., a part-time job. Next, are your teens old enough to take part-time jobs? The three of you need to pull together right now. Possibly they could bring in some extra income to help support the three of you and, right now, to save. Even if they just made enough to contribute to some of their own expenses, that would help. Fourth, ask your ex. (if you are comfortable with your relationship) to help out more with the children, at least on a temporary basis. Or petition the courts since your income appeqrs it is going to be less than your husband's income. Next, begin now to look for another job. I know the job market is tight, but there are jobs out there; maybe not what you are doing now, but work that will bring in some income. When you do receive your retirement income, consider carefully before spending it, or even taking it out of your retirement fund. Consider the penalty and taxes if it is in a 401K account. See if you can generate enough income to make it without using your retirement savings. Finally, consider God. He is a help in trouble, and quite often we humans seek Him and find Him in times of trouble. I'll keep you in prayer. God bless, and let us all know how you are able to manage along the way.

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