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You could redistribute those dollars to your emergency fund. You can then find areas of careless spending-perhaps an unused subscription service-where you could stand to cut back. In addition to making your emergency fund a priority, this budgeting strategy helps you identify exactly how much you spend within each budget category each month. This form of budgeting gives every dollar you earn a job, such as paying a bill, funding your emergency account or financing fun and discretionary expenses. To build an emergency fund and save for an unexpected job loss, Stewart recommends starting a zero-based budget. She notes the actual amount of money you need to save for an unexpected job loss will vary based on your lifestyle, employment industry and willingness to relocate, since this can dictate how long it could take to find another job.
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“The goal is to make sure all your bases are covered, meaning you can pay the bills and proceed with a relatively normal life until you find another job,” Stewart says. You’ll get used to budgeting only with your post-savings take-home pay, and you won’t miss the savings portion of your paycheck.Ĭhristian Stewart, founder of a financial coaching website, recommends having an emergency fund of three to six months of expenses to help you survive a layoff financially. If you devote even a small percentage of your paycheck to savings before the bills and discretionary expenses roll in, saving will eventually become habit. Some budgeting experts suggest saving at least 20 percent of your income and living off of the other 80 percent. As you get accustomed to that amount, gradually increase the percentage of your paycheck you save each period. This means that if your take-home pay is $4,000 a month, your goal is to put 3 percent, or $120, into savings monthly and then limit your bills and spending to $3,880. You could start with a money savings challenge and a more attainable goal, like living off of 97 percent of your paycheck and saving the remaining 3 percent. If living on less isn’t feasible for you right now, start small and focus on taking baby steps to prepare your budget for a layoff. Try scheduling an automatic recurring transfer from checking to savings that hits after each payday, or create a direct deposit to savings from each paycheck through your employer. “Put money directly into your savings account the moment you get paid so that you’re never in a position where you’re strapped during a true financial emergency,” Caponera says.
Jill Caponera, a consumer savings expert at a coupon platform, suggests paying yourself first-putting some of each paycheck into savings before you spend any of it-in order to save for an unexpected job loss. That way, you can always depend on having extra money to fall back on in the event of a hardship, like a layoff. If you can afford it, consider trying to live off only a portion of your paycheck. Living paycheck to paycheck is a reality for many, and a habit many promise to break once they earn more. In order to prepare your budget for a layoff, one of the best things you can do is learn to live on less when you have your typical paychecks coming in. What can you do to prepare your budget for a layoff? These four steps will help you prepare your budget for a layoff and survive a layoff financially: 1. While it’s not exactly fun to plan ahead for life’s hardships-say, your car breaking down or losing a job-doing so can help you stay afloat financially and avoid taking on debt to remedy an already tense situation. What would happen to your financial situation if you suddenly didn’t have an income to rely on? What would you do if you were laid off from your job today? This question isn’t meant to make you want to hide under your desk, but to encourage you to evaluate your circumstances.