How Should Families Prepare for Potential Job Loss?

By Deborah Nayrocker

Dear Deborah: My husband thinks that his job may be in jeopardy. What can we do now to make it easier to cope with a possible layoff? — Sue

Answer: You’re doing the right thing to stay ahead of the curve. When laid off, people first try to deal with their fear and uncertainty about the future. Planning ahead makes the announcement of a pink slip considerably more manageable.   Unemployment numbers don’t look good. According to The Wall Street Journal (3/6/09), the U.S. has lost more than four million jobs. Economists predict the financial picture this year will continue to sour, with the jobless rate going into the double digits (WSJ, 3/08/09).

What are some sensible steps you can take now to make a possible layoff more manageable?

  • Figure out your minimum expenses. What dollar amount do you need to pay the mortgage or rent, groceries, basic utilities, and essential insurance? What are your priorities? What can you do without? Sit down with your husband and analyze your budget.
  • Add up your cash reserves. Then add to your cash reserves. How much is sitting in your savings, money market, and checking accounts? Decide what discretionary expenses you can reduce or cut to grow your emergency fund. Aim to save three to six months of living expenses.
  • Develop a monthly spending plan. Record your spending and stick to your budget. Keep track of how much you spend.
  • Cut back on credit card use. Keep your card balances at less than 50 percent of your available credit so you don’t hurt your credit score. Use only one credit card. Continue making the minimum payments on time.
  • Pay down debt. Families with little or no debt are able to survive job losses better than those loaded with debt.

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Deborah Nayrocker is an author and columnist. She is the award-winning author of The Art of Debt-Free Living and Living a Balanced Financial Life.

Copyright by Deborah J. Nayrocker. All rights reserved.