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Transition and Our Finances |
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Prayer-Soldier writes "
There are a number of situations that can place us out in the job market. In some cases, it may be planned, such as the decision to start a new career or to look for opportunities with another employer. In other cases, the decision may not be ours, rather, a contract that is ending or a corporate layoff could suddenly leave us out of work.
If we have work and are looking for work, finances are probably not much of a concern, but if we face an employment gap, finances can become a critical issue. Even in planned situations, the potential for an employment gap can become unpredictable. Regardless of the situation, we should have a financial contingency plan that will cover us and those who depend upon us in the event we lose our source of income.
The worst case scenario is what to do in the event we suddenly lose our job. If we have a financial contingency plan, we should be able to quickly shift to a conservative budget and will be able to shift the majority of our attention to the job search. If we don’t have a financial contingency plan, we may squander assets that could later prove to be critical.
Our financial contingency plan should start with an assessment of required versus discretionary expenses. Discretionary spending appears to be the most obvious source of conservation, but a prudent assessment of fixed or required spending may present savings opportunities as well. The objective is to identify a conservative budget and project how long our liquid or near liquid assets will last while in-between jobs. The objective is to have a plan that will cover us for at least six months. We may want to consider a longer period the more senior or specialized our job position is. It may be more difficult to find similar employment in such situations.
Even if we have what we consider to be a secure job, we should periodically revisit our financial contingency plan. This is especially true if we take on a significant expense responsibility such as a loan for a new car, college tuition, a new mortgage, or an equity line. We must account for new financial responsibilities when we consider the impact to our contingency budget.
We should also take into account periodic expenses that may be on a quarterly or annual budget. Do we know where we are in relation to such potential expenses? Are we also aware of home and auto maintenance? We should factor in such issues as an aging car or home appliances. What is the potential we will face a major home or auto repair expense? Do we have credit that can cover us and what is the cost of that credit should we be forced to rely upon it?
All of these variables can impact the duration over which our finances can cover an income loss, but if we have evaluated our financial contingency plan, we will be in a better position to make informed decisions. The issue is not just providing during a loss of income, but protecting ourself such that we do not risk our credit rating, or worse, critical assets while we are seeking a new income source.
Beyond asset protection, a financial contingency plan can also make a difference in decisions associated with our job search. The more secure our financial situation; the more options we
have in selecting the job we want. We want to be in the position of selecting a new opportunity that is consistent with our goals. If we do not have a financial contingency plan, then, we may place ourself in a position where we feel we must take the first thing that comes along; and chances are we will end up compromising something along the way.
Printed with Permission. Copyright © 7 Jun 05 - all rights reserved. http://www.guardianangelstore.com
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Posted on Thursday, July 02 @ 21:56:29 MDT by drbonebrake
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