It seems like there is a new company laying off employees each day in the news. While there are certain industries that are especially prone to layoffs right now, just about everyone is at risk in this difficult economy. Unfortunately, many people today are finding out how important having money saved in a safety fund really is. Many of those who are losing their jobs are finding out this important lesson too late.
As the saying goes, the only certain things in this world are death and taxes. That rings especially true today, as the economy and stock markets are as unpredictable as ever. When things go bad for a company, even the best of employees can lose their jobs. No one is really safe from the ax when a company finds its back up against the wall financially. Given this uncertanty in the job market, it is very important to have money saved in a liquid account that is designated for just this situation. The money should not be touched for any reason other than an emergency or in the event of a job loss.
Generally speaking, it is advised to have enough money saved up to cover 6 months of living expenses. For many people, this amount is just not possible to stockpile, but it is important to keep at least a minimum of 3 months worth of expenses on hand. In the event of a job loss, it is always difficult to tell how long it will take for you to find another job or what the salary of your new job may be. Especially for those in struggling industries or with high salaries, it can take 6 months to a year to find a new job. This sounds like a long time, but it is very possible that it could take that long to find a suitable replacement position.
While you are not earning a salary and are out looking for a new position, your safety fund can help keep you out of financial ruin by covering your expenses while unemployed. If you plan your fund without taking consideration for potential unemployment income or money from side jobs, you will find that this income will help to prolong your ability to survive while you look for your next job. If nothing else, just knowing that you have the money in the bank can help you feel safer at work and reduce stress in these uncertain times. If you havent started saving money in a safety fund, now is the best time to start. Please don’t wait until it’s too late.
Justin Scarborough is founder of the Top Finance Blog which provides information and personal finance tips for readers.