Monday, June 11, 2012
Act As if a Layoff Will Happen to You
I just finished reading Suze Orman's The Money Class: Learn to Create Your New American Dreamand her advice may be the most important information I can share with working, unemployed, and underemployed nannies this year!
Every week, (sometimes daily), I hear stories of unemployed and underemployed nannies. Nannies constantly complain the great nanny jobs of former decades no longer exist. During this difficult time when nearly one of five Americans is out of work (including nannies) Suze Orman shares the most important advice for the employed, underemployed, and unemployed as America slowly climbs out of economic recession.
For those who are lucky to be employed her advice is to behave as if a layoff will happen to you. Hope that it never happens, but if you plan as if it will, you and your family will be well prepared to weather any setback and get back to work as soon as possible.
Build Your Emergency (Plan-For-The-Worst) Fund
Planning and adding to an emergency savings fund that can cover your living expenses is the first step to preparing for the worst.
As of the fall of 2011 more than 40% of unemployed Americans have been out of work for more than six-months, and nearly one-third have been out of work for more than a year. That is why you should build an emergency fund that could pay your bills for at least eight-months.
Orman explains, "Yes, I realize you may collect unemployment benefits, but typically those payouts cover just a fraction of your former salary. Do not skimp on your savings because you think unemployment insurance will be all you need."
Building such a large savings may sound like a daunting task, especially if you are working paycheck to paycheck. But, Suze suggests not getting overwhelmed and giving up before you start. The immediate goal is to focus on how you can trim your spending so there is more left over each month to dedicate to your emergency savings or "plan for the worst" fund.
Live Below Your Means Today
There is no guarantee your salary five-years from now will be higher than it is today. The only way to save is to make money and not spend it all. Be honest with yourself. Don't borrow money today than you can honestly afford.
Orman explains, "I want you to make financial choices today that are affordable based on what your household income is today, not what you hope it will be in the future."
She continues, "I'd much rather you rent or buy a smaller, less expensive home, or purchase a less expensive car today, than stretch to buy something that you know deep down is an act of living beyond your means."
Do you live paycheck to paycheck, or do you have an emergency fund savings account?