Welcome back, friends! Today’s post will be more of a heart-to-heart, with less discussion about finances and more about our life situation. Losing my job has brought about several realizations that I’ll go into in a bit. But, the biggest of them all is that this is the perfect opportunity to put my money where my mouth is. In other words, it’s the chance to visibly demonstrate the circumstances in life don’t define us but help shape us. As we look to the future, our responsibility is to take action and make decisions. Here are a few key observations that have become apparent through this set of life trials:
Losing my job was a blessing in disguise.
This situation gives us a chance to re-evaluate our true financial needs.
We were well-prepared for a financial emergency, and we are thankful.
Losing my job was a blessing in disguise
For starters, losing my job wasn’t a terrible thing. Yes, it absolutely doesn’t feel good. I mean, regular income isn’t coming in (albeit unemployment is), benefits aren’t available, and the opportunity to invest in a 401(K) has also vanished. But, my identity wasn’t tied to my job. My world didn’t come crashing in around me. I’m not defined by being a “business analyst” or whatever title I hold.
This job had an immense amount of stress I wasn’t even aware of until going to work was taken from me. So much so, that on the day I was let go, I found a great sense of peace and relief. I realized that after taking time to decompress I was just bottling up the stress.
THIS GAVE US A CHANCE TO RE-EVALUATE OUR NEEDS
This life challenge has also given us the opportunity to evaluate what expenses in our budget are real needs, and separate those from ‘supposed’ needs. Here at Pocket Change Lifestyle, we would encourage you to review your expenses at least 1x a year to identify and save money. Losing my job created another opportunity for us to do this, albeit due to an extreme case.
We’ve found that one area in our budget we were flexing on a bit too much was eating out, so we’ve cut that back. We’ve also been careful while grocery shopping to not put extra food in the basket. Lastly, we’ve limited our trips out of the house, cutting costs in several ways.
Ultimately, the financial aspect of losing a job would cripple most families. I’ve demonstrated this with the bar charts below. Paying a $1,000 mortgage, plus $400 in groceries, $200 in gas, $100 in health expenses, $300 total in car payments… that’s $2,000 right there without fully deconstructing a budget. The loss of regular income could push someone/a family into foreclosure, repossessions, and even bankruptcy in less than a month if not prepared for a financial emergency. Preparing for a financial emergency is extremely important!
Having a well-stocked savings account (we recommend at least 3 months of your monthly expenses) will provide a much-needed buffer to meet financial obligations during this transition. Because we put an emphasis on getting our savings account stash built up this last year, and because our expenses are shrinking, we’re in a good spot and can meet our financial obligations. We are so thankful and glad that we took this approach, although those funds are primarily earmarked for the future. Flexibility is key!
HOW DO YOU PREPARE FOR A FINANCIAL EMERGENCY?
Studies done over the past several years reflect that an alarmingly large number of families wouldn’t be able to handle a $1,000 financial emergency. One theorized cause of this is a lack of a savings buffer built up to withstand the turmoil of life. Furthermore, the flame is fanned by cash being tied up in student loan payments, car payments, and other consumer debts. The big question is this – when all of your cash is tied up in obligations, how do you break that cycle?
Here’s a great place to start. Take a financial inventory of your life including your accounts, and your obligations and debts. Then create a budget, including an amount to set aside for an emergency. Do not skip this part! As time goes on, make adjustments to the budget, and look for ways to cut expenses. As you know, a budget isn’t set-in-stone, but is a living and breathing entity. It must be reviewed and cared for regularly.
The money you put into a savings account may not be much, but it’s something. Start with a smaller amount, say $25 or $50 a pay period. Then, increase it little by little with any expenses you’re able to cut. Then, keep pushing forward and don’t give up! Soon enough, you’ll have a nice buffer of cash built up to help withstand a financial challenge.
Every opportunity we get to review our budget and expenses gives us another chance to learn, grow, and implement new strategies for life. We’re thankful for this opportunity to demonstrate the value of establishing a savings buffer, and highly encourage you to start saving or to save more!