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What’s your runway? That is, how long could you cover your expenses if you lost your job or faced some other hardship? Sobering questions like these are on all of our minds as uncertainty about the economy consumes much of the country. Last month concerns about tariff policies and a potential recession turned Americans’ expectations about future income prospects negative for the first time in five years, according to The Conference Board’s Consumer Confidence survey. If you have enough saved to cover three to six months worth of living expenses — as experts recommend — you’re already ahead of the game, since many people don’t. But figuring out how to stretch those limited dollars over an unemployment gap of unknown length can still be stressful. You can take control of your finances — and be better prepared — by planning out exactly what steps you would take if you’re laid off. Create an emergency financial plan, as it were. There are no set rules for these kinds of plans, and for some, it might be enough to make a quick mental list of backup options. But you can get as detailed as you want, writing up a step-by-step plan for what you would cut from your monthly budget when and how you would pivot if your reserves are dwindling. The key is the timing: determining what you would do right away and which extra steps you would take if your unemployment was extended. Here are a few questions an uber planner will want to answer as they create their emergency financial plan:1. Would you be eligible for unemployment benefits, and if so, how much could you expect to collect each week? This roundup of rules for each state can help.
2. How much monthly income will your household have without yours? This would include unemployment benefits, SNAP or other government assistance you may be eligible for, a spouse or partner’s income, investment income, and alimony or child support.
3. What are your baseline monthly expenses — your rent or mortgage payment, utilities, food, gas, debt payments, etc. — and how much do you spend on optional things? Can you rank those optional or discretionary items from most to least cuttable? (For instance, maybe you cancel streaming services and stop getting takeout right away, but only stop your gym membership or kid’s piano lessons if your savings fall to a certain level.)
4. Could you take on any temporary or part-time work while you look for your next permanent role? If so, how much could you earn?
5. At what point will you consider taking more drastic measures and what will those be? Could you borrow on your credit cards or take out a loan? Apply for forbearance with one or more lenders? Dip into your 401(k) or IRA? So what? Unemployment most typically lasts about 10 weeks, but 23% of the people unemployed in April had been out of work for at least 27 weeks, according to government data. Having a healthy emergency savings and a plan for using it can help you prepare you for whatever happens. Plus, confronting the worst-case scenario often reduces stress and anxiety — and gives you back control of the uncontrollable.
Related Reading
• 5 Things to Do to Come Back From a Layoff (SoFi)
• Reducing the Harms of Unemployment (University of North Dakota)
• In Case of Emergency, Break Glass: Managing Household Liquidity (Vanguard)
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