Reducing Financial Impacts of a Job Loss
My wife was recently notified that the preschool she teaches at for a few hours a week is shutting down. It got us thinking about a more difficult scenario for us - the loss of my job. Given its by far the most significant income we have we'd be in a world of hurt rather quickly if something happened.
One of the things we have been working over the years is to expand our multiple streams of income as this is by far the best way for us to divert a potential disaster. Reduced reliance on a single income could be a huge safety net for us. However I recognize we are not in a comfortable position yet.
Ideas for Immediate Actions to Minimize Financial Impacts From a Layoff:
- Cut Cell Phones: We'd take a hard looking at canceling our cell phone plan or at a minimum put them on reduce rate suspend to minimize expense.
- Reduce Internet: Internet ranks up their with food and energy in our household so not sure we could cut it out completely, but we could reduce our service level a bit to cut our bill.
- Discretionary Spending Lockdown: Change our spending mode to only purchase basic groceries and gas. Get family agreement we aren't going to spend money on anything else till we get in a better position. Would need a better long term plan but this should be a reasonable immediate reaction I think.
- Eliminate Eating Out: All meals made at home for the time being. Again long term would likely need a better plan, but think this is a reasonable short term action.
- Switch to High Deductible Insurance: We are currently on the most expensive health insurance plan through my employer because my wife and I regularly need medical care for chronic conditions. We'd take a hard look at switching to a high deductible plan recognizing we'd likely need to make some sacrifices in terms of the level/regularity of care we current receive.
- Stop/Reduce 401k Contributions: With a job loss comes the immediate need to conserve cash and with any remaining paychecks I want to maximize our incoming cash. I think if we were faced with a job loss the immediate needs are more critical than long term. I would at a minimum drop my contributions down to the company match level and might cut further if we thought we needed to.
- Stop Roth IRA Contributions: We currently contribute roughly $800/mo to our Roth IRAs. Again same as 401k - our immediate needs become key and I would stop contributions to conserve cash until our income situation recovered.
- Cut Additional Principal Payments: I would shift focus from eliminating debt to retaining as much cash as possible and not paying anything above the minimum debt service payment required.
- Cut Back Thermostat: This would be a tough adjustment for the family, but I'd propose we cut our thermostat back to say ~60/winter, ~80/summer. It would be tough on all of us, but I think we could manage and I would need to negotiate a family agreement to make this sacrifice to minimize our energy bills.
- Reducing Driving Trips: Today we run errands as they pop up because we are busy. With a job loss I'd think we should really focus on optimizing and planning our trips to avoid additional gas expense.
- Stop 529 Contributions: I'd immediate pause our 529 contributions until our income situation improves. It is a cash conservation measure and I would look to make up lost ground when our income situation improves.
- Drop Umbrella Insurance Policy: I'd be willing to take more risk in the name of conserving cash and look at dropping our umbrella liability insurance policy until our situation improves which would save us about $200/yr.
- Stop DRIP Investments: We put $25/mo towards a Connoco DRIP. I'd immediately stop our DRIP investments until our situation improves.
- Collect all dividend payments: A temporary income boosting measure - I'd switch all our dividends to cash payments vs dividend reinvestments.
- Change Witholding on Remaining Paychecks: As a short term cash boost I could alter my witholding to boost incoming cash. This could cause longer term pain if not planned properly and we end up owing the government more money, but this tactic could help with short term from a cash management perspective.
Making the Most of Time
The one positive of a job loss would be additional time. I am currently very time poor and I believe it would be critical to use the newly found time wisely to minimize our income loss and focus on restoring our major source of income.
Other than putting sharp focus on the job hunt, I could see these areas as potential opportunities to invest time:
- Have wife expand her side income (tutoring/preschool teaching) while I take on more housework.
- Invest labor into increasing energy efficiency of our house to reduce expenses (ex additional air sealing, etc)
- Expand our garden to grow more of the food we eat.
- Part time jobs - I hopefully wouldn't hesitate as a stop gap to pick up a lower paying part time job.
- Sell stuff on craigslist - It would be a good time as any to do some serious purging in the house and try to raise a little cash from those items we want to get rid of.
- Extreme couponing - I enjoy doing a bit of extreme couponing, but its not something I spend a lot of time doing currently. I could invest additional time in tracking coupons/sales to further minimize our food expenditures.
Any other ideas you would add to these lists?
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