How long could you survive if you lost your job?

I’m not trying to be all doom and gloom but I want you to start thinking about how long you could survive financially if you were to lose your job. How long could you continue to pay the bills? Six months? Six weeks? Six days? I know its not nice thinking about these things but deep down I reckon most people realize that planning for redundancy is very important in today’s weak economic climate.

Have you put much thought into it? If you are like most people then the answer is probably no. That’s ok because I never really put too much thought into it either. That was until there was a series of head count reductions in the company I worked for.

It was around May 2004 and the company that I worked for at the time was going through some serious difficulties. As a cure for these problems management decided that it would be a good idea to reduce headcount by 15%. For some strange reason the department that I worked in was particularly badly hit. I estimate we lost about 40% of the people who worked there.

What really got to me was what happened to the people who lost their jobs after they left the company. I remember thinking at the time that the redundancy packages were fair and that they should allow the people who were laid off enough time to find a job. Part of me was even envious at their enforced break. The thing that I hadn’t taken into consideration was how much the jobs market had changed.

After about three months most of the people were still struggling to find work and by this stage they had spent their redundancy packages on day to day living expenses. I remember hearing that a few of them were getting into serious financial trouble because they had been sailing pretty close to the wind financially even before they lost their jobs. The loss of their jobs tipped them over the edge financially.

Stories like this got me worried. At the time my financial focus was on paying down my debts but a part of me realized that I should be paying more attention to creating a big emergency fund. But not only should I have been increasing my emergency fund I should have been doing other things to cushion the blow of any potential redundancy.

To ease my worries I set about doing three key tasks.

I gave myself a period of 4 – 6 months in which to complete these tasks. I figured that because management had just completed a round of redundancies that it would be at least another six months before they would go at it again.

The first thing I did was to calculate how much money I needed to survive and pay my bills for six months. I calculated this figure by taking my monthly expenditure on essential items and multiplying by six. I then estimated any big bills that could potentially come up in any six month period – things like car maintenance, insurance, tax etc. I added the two figures together and I came up with a figure of $7800.

I resolved within myself to save like a crazy man until I had hit that target. It was highly ambitious given that I was still repaying debts but I felt that it was the right time to be focusing on building a big emergency fund.

The second thing I did was that I tried to do as many of the internal training programs that were run by my company as I could. Everything from building rapport to client management, I did as many as I could. The training was free as it was run internally. The budget for training had been cut deeply but if you put your name down far in advance you could pretty much get on any course you wanted.

By doing a lot of the internal training it achieved two very useful aims. The first was that management saw that I was eager to learn and that I was motivated. The second was that I was developing very saleable skills that I could put on my CV and bring to any potential future employer.

Finally the third thing that I did was to begin researching the jobs market. I became familiar with the companies that were recruiting. I would scour the jobs websites maybe once or twice a week to get a feel for what was out in the market. At the same time I was fine tuning my CV. I updated it and I began to tailor it to suit the roles that I was interested in pursuing should I have been made redundant.

The net effect?

The six month period that I set myself to achieve these tasks passed without incident. Work went on as normal once the office had calmed down after the upheaval of the redundancies.

I managed to save a total of $5400 – it was short of the target but it was still some going all the same. I was proud of my achievement.

I continued to do the training courses and research the jobs market.

These tasks combined to leave me in a much stronger position than my colleagues if there was to be further redundancies. I wanted to be playing from a position of strength if I got that redundancy letter. As soon as I started to work on these tasks I took the power back into my own hands. I have to admit that it gave me an immense sense of relief to know that if worst came to worst that it wouldn’t be so bad after all.

Now it’s your turn to examine your contingency plans for redundancy. Do you have a contingency plan? Can you see the merit in having one? A lot of people get caught short when they are made redundant. They don’t have any emergency funds and as a result tend to rely heavily on credit cards and bank overdrafts – this is a recipe for disaster. Don’t let that be you. Start as soon as you can to build contingency plans for your job should it go pear shaped. You just never know what is around the next corner.

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