Are you concerned that your job will be eliminated? A job loss can cause intense financial and emotional stress, not only for you but for your family as well.
The good news is that if you’re prepared, losing your job doesn’t have to be a disaster. By taking responsibility for your situation and creating a plan for the future, you can move forward with confidence and financial security.
If you fear that your job will be eliminated, there are a number of steps you can take to safeguard your financial and emotional health. Don’t just hope things will work out, plan for them to work out. Develop a budget or cash flow plan so you can manage on a reduced income if necessary.
1. Write down your goals, including short - (12 months), medium- (two years) and long-term (three years) goals. A short term goal might be as simple as "find another job within three months" or "reduce expenses so that we can live within our means until I find another job." A medium-term goal might be "save enough money to replace an aging vehicle."
2. Estimate your monthly expenses and income for a 12-month period. Even though you many not know exactly what you spend each month, take your best guess. When determining what your income will be, you will need to find out what your employment insurance payments will be if your job ends.
3. Track your actual income and expenses for one month. Keep receipts and record every expense — even small purchases, such as coffee, cigarettes, magazines, etc. At the end of the month, add up all of your income and expenses.
4. Compare estimated with actual income and expenses for the one-month period. Look at each category that was more than your estimate. For example, if you planned to spend $50 on cellphone service, but actually spent $100, determine whether this was an unusual occurrence or your normal spending pattern. If it’s typical, decide whether you want to cut back on your cellphone spending or reduce your spending in another category.
5. Involve your family in the budgeting process. Discuss the impact a job loss will have on the family’s finances. Talk about the differences between "wants" and "needs." Include them in decisions regarding major family expenses, i.e. "do we sell one of our cars or should we cancel the week at the cottage this summer?"
6. Modify your estimates for the upcoming month and repeat the process. Although this may seem tedious at first, it will become easier and more rewarding as you create a reliable plan and learn about yourself financially.
7. Review your goals and determine whether you will be able to achieve them with your budget.
It may take several months before you and your family can live within your cash flow plan, but ultimately, you will have greater control of your spending and saving.
» Next week: Facing a Job Loss Part 2: Time to Regroup
» Wayne K. Palmer is a senior manager in BDO’s Brandon office. He is responsible for both the consumer and commercial practices in Brandon and surrounding areas, including Boissevain, Minnedosa, Neepawa and Dauphin. Wayne has more than 25 years experience in the financial recovery services field.
Republished from the Brandon Sun print edition October 27, 2012