With the financial crisis going on worldwide and the rising unemployment rates in most countries, there are no secure jobs in most sectors of the economy. That leads to the question: If you lose your job today, how long can you survive without getting a new one?
Well, maybe “survive” is a strong word, but you get the point. In other words how long can you keep your normal living standards or at least live close to them.
For most people their jobs are the only source of income they have. If they get fired from their workplace, they will have ZERO income, but the living expenses are not going anywhere.
If you are one of those people, you are in trouble.
Another warning fact is that most of those who rely only on their salaries don’t have the finances to live more than a month or two. They live paycheck to paycheck and have small to none savings.
There are 2 possible reasons for this:
– Their salaries are really small and barely provide the living, so they can’t save or invest
– They have bad spending habits and too much expenses
For some people is just one of those things, for other people is both. The truth is most people have poor money management skills. They get into bad debt, they buy things that they don’t really need and they rely only on that paycheck to cover everything. That’s why they can’t stay without a job for a long. Their expenses are eating them alive.
Unfortunately when you lose your job and have nothing to live with, you eventually get in bigger financial hole. You are forced to take new loans that add up to your expenses in the future. You have to lower your living standard. Sure, you may get compensated by your previous employer, but that’s not always the case.
My recommendation is that everyone should have savings that can cover at least 3 months of living, it better be 6 months. If you don’t have that, you better do something.
1. Start with calculating your average monthly expenses. I’m surprised how many people don’t know how much money they spend. Include everything. Sure, when you lose your job you should cut some of your current expenses.
2. Look at your savings. For how long can you live with them considering your average expenses?
3. Compare your expenses to your salary. If your expenses are 90% of your salary, for example, you need to save the other 10% for 9 months so that you have savings that will cover your expenses for a month.
4. If your salary is too small and you just can’t save anything, find another income source fast.
Having a job is the only way for most people to earn money. Being a businessman or investor is not for everyone. But in these days to rely only on your job without having other income streams seems risky. Employers delay payments and the probabilities for many people to get fired are higher than ever.
If you have a business
OK, lets say you don’t have a job, you are running a business. If your business doesn’t make profits, you are in tough position as well. It’ basically the same question. How long can you live without profits from your business and how long can your business stay without making profits (losing money)?
Savings and cutting expenses are not the answers to your financial problems. They are just needed sometimes, so you don’t get in bigger trouble.
Now go and figure out how long can you stay without a job. You better know it.
Category: COMMON SENSE