Have you ever stopped to consider what would happen if you lost your job? Do you know how much you’d get from unemployment, or what your bare bones expenses are?
I’ve steadfastly avoided thinking much about it because it’s one of my deepest fears.
As much as I complain about our stressful finances, I know we’re actually in a pretty good place. We have savings — up until Tim’s teeth need to get done — and I bring in a more-than-fair amount from my job.
But occasionally the thought flits through my brain at full volume, “WHAT IF YOU GET FIRED?” And panicked screaming begins in my head.
Because we’d be screwed. I’m not eligible for unemployment, and the other companies in my industry don’t offer telecommuting. Thanks to fatigue, there’s just no way I can reliably work outside the house.
So I start thinking about how on earth we’d live on Tim’s $730 disability check. (Even if I reapplied for disability, I’d be lucky to get approved within two years.) I’m sure Tim would try to work, but his various conditions mean it’s unlikely he could keep it up.
But then a thought occurs to me: I can freelance. It’s by no means easy. I’d be stressed pretty constantly between querying for jobs and balancing multiple deadlines. Plus, by and large, you’re just not paid a lot for posts. Even some of the bigger sites can pay as little as $50. Maybe they pay more for regular contributors but… eesh.
So I need to assume the worst case scenario. I have to assume that we’d be scrambling to meet our basic costs. What would that realistically look like?
Well, we’d need to cut the IRA contributions and stop paying extra on the mortgage. Without my current job, we could switch to a lower speed for Internet. We’d also scale down to the smallest Vonage package. The guest house rent generally covers all of our utilities, but I’d budget an extra $100 just in case.
We’d keep Hulu and Netflix in there ($32). We’d also still pay for the Banfield plan for Patches ($26). And I’d want to put money aside $87.50 a month for car insurance and $75 a month for Tim’s quarterly re-up on medications. Given his physical problems, Tim needs at least one massage a month. More realistically, two. We can keep bartering for one of them and pay our discounted rate ($35 plus tip) for the other.
In the end, the number is right around $2,550. That might be a little optimistic, but let’s assume we’d be able to tighten our belts.
That means I would need to earn about $1,820 a month in freelance. Which means I might have to finish a post every other day — or even more frequently. Over time, of course, I could start asking more and get some regular gigs, which generally pay a little better.
I’d also invest some time and money into this blog to get it profitable: a cleaner theme (only been meaning to do that for two years), more networking/leaving comments to drive up traffic, more affiliate stuff.
I should mention that it’s incredibly unlikely that I’d get fired. We’re doing well enough that my boss actually gives out yearly bonuses. Plus, I’m the only person working days. So if money got tight, I bet I’d just have to take a pay cut.
But if the worst did happen, at least I know I can manage. We wouldn’t run through savings immediately. We wouldn’t lose the house. That nicely quells the fetal-position-inducing panic that crops up around the subject.
What’s your emergency budget? If you couldn’t get a job in the same industry, how would you make ends meet?
Anna says
Let me preface by saying my comment is not meant to be purposely rude, just trying to get a better understanding of what you mean by emergency budget? I found your blog through your mother's (after having read her well-known $12,000 MSN article) and her definition of emergency seems quite a bit different. *You're different people, different situations, I get it.
But in my eyes, emergency constitutes the bare necessities. Shelter + utilities (which can be cut through personal habits, I've done it), clothing, & food. Whenever I've considered what I'd do if I lost my job, the first things to go would be things like internet & TV subscriptions. I realize you're both home a lot, and you freelance, but an antenna & library card can go a long way in terms of DVD rentals, books, & internet access. Does your emergency budget take out saved savings or account for a tighter grocery budget, i.e. no eating out, cooking from scratch?
Just trying to understand what that $2,550 includes if you're okay going into further detail.
Donna Freedman says
Using the library Internet just wouldn't work for a full-time freelancer. You can't always get a computer and you're often limited to an hour or two.
As a freelancer you need to be available at any time for an editor to contact you with questions about something that's going to be published the next day. (Ask me how I know.) I've also been offered freelance opps with very tight deadlines, so if I hadn't responded immediately the gig would have gone to someone else.
You also need to be able to check facts on something that's due the next day, e.g., to go onto the USDA website and find out average grocery budgets or to check the Bureau of Labor Statistics for current unemployment levels. Ideally you would have done all that research in your hour or so at the library, but life isn't ideal (especially if you have a chronic illness). Besides, sometimes a new wrinkle occurs to you as you write; being able to do a quick turnaround on the research makes the piece better, which in turn helps ensure that you'll be hired again.
As for the TV subscriptions, well, I expect they'd ditch them if things got really dire. But if you rarely leave the house, television becomes not just your main source of entertainment but also your window on the world.
And yeah, we're definitely different people. My partner and I have zero food allergies/other health issues, and we possess the ability to be content with a big bowl of ham and pinto beans. Everyone else's mileage may vary.
Holly@ClubThrifty says
Everything Donna says here is true! Late night emails are an essential part of the job. You also get jobs that are due the next day from time to time and you cannot take those jobs if you only have internet access when the library is open!
Abigail says
If I were freelancing, I would need constant access to the Internet. My energy varies, so just hopping over to the library might not be possible. Plus, there's the issue of hours of access, etc.
Yes, technically the absolute bare bones budget wouldn't include entertainment or the cat plan. I suppose I should have qualified all this: I'm trying to be realistic. Going to the library can be problematic, which means that late fees pile up quickly. Even when we're doing our best. So I'm trying to figure out the bare bones that we could realistically sustain.
If I consistently weren't making enough, then yes we'd cut the extra $30. But this bare bones budget is going for sustainability rather than everything we "could" cut.
It would be like me saying I could cut our grocery bill down to $150ish with couponing. Technically possible, but especially writing that many posts, there's just no way I could handle it.
As for saved savings, no the budget assumes that, at least initially, we wouldn't be able to put a single cent away. It assumes we stop buying junk food entirely. Given how busy I'd be, we'd probably need to just give money to Nadine to cook bigger amounts and just eat that.
That amount is the cost for basic expenses that keep us housed, fed, and realistically entertained. (The $30 is also assuming a price increase going up from the current ones, even if we cut down to one DVD at a time instead of two.) Assuming Republic is a viable option (I'm testing that soon), that would save another $20 or so.
Unfortunately, even if we thought it was a good idea to nix the cat insurance, we're on the hook for a few more months as it's a yearly plan.
So assuming we could switch to Republic and manage to do without anything but antenna TV and in the summer could nix the cat plan, we'd be down to $2,475. Not that every cent doesn't count in an emergency.
Holly@ClubThrifty says
People who don't do online work might think of internet access as a luxury, but it is NOT a luxury in this day and age. You can't pop over to the library to answer emails every few hours!
Abigail says
Yep, even healthy people can't manage that.
Amanda C says
I was laid off over 6 months ago and have been sort of living on an emergency budget. I have been collecting EI which has helped a lot, but that's abut to run out. Regardless, my fiance's hours were cut over the summer too so we had to cut back considerably. We have a free year of cable and internet through our landlord, so that wasn't an issue. Otherwise, I quit the chiropractor ($80/month), we stopped eating fast food, no more alcohol, and were a lot more conscious of how much gas we were using. Even with all of our penny pinching, we ended up in debt because our fixed expenses were too high.
Abigail says
Frustrating to say the least. We'd definitely have to cut out convenience food. I'd need Nadine and Tim's help so that I wasn't doing all the work and cooking. But it would still be tough. Although less fast food would mean we save a lot of gas!
Cathy R says
It is an interesting thought exercise, isn't it? I have a vague idea, I guess, but I should probably nail it down just in case. I know that I currently don't have the proper amount in an emergency fund and am working on refilling the cache even as we speak (yay, payday tomorrow!).
I'm also lucky to be in a job that is fairly secure. It is a luxury that I'm thankful for, but also one that I have worked my entire life to achieve.
Abigail says
Yeah, I have pretty good job security, but I still worry. And it seems like our EF isn't quite enough, either. It would need to be $7,650 instead of $5,000. But we also have general savings. Not sure how much I want to divert from there. I'll figure it out. I hope your numbers come out well — and that you never have to actually worry about them.
Revanche says
A sustainable bare bones budget for me wouldn't rely on canceling every service either, since like you, leaving the house often isn't an option. I do cut every fixed expense possible NOW so that we can save that money ahead of need, though.
I haven't run the Bare Bones Budget in a little while but after my nearly year-long layoff, I always want 1-2 years of Full Budget expenses saved up. Preferably 2. Maybe more….. hi, I'm the Baglady Syndrome personified.
Even knowing I could last a good while on savings supplemented with some unemployment, I was STRESSED that whole time b/c once that ran out, it wouldn't just be me scrambling. I don't have Mom's health to worry about now but there's still Dad and his bad decisions, there's the sibling with his, and I know that I don't know what all shenanigans they'll get up to. I do now have PiC to help at least which I cannot even be grateful enough for. Even so, it's still a VERY scary notion that we might have to support 4.5-5 people in 2 households on one salary if I was out of a job. Not to mention that I'd also need a new job that paid well enough to cover my lost salary that didn't put more physical demands on me than I can handle… that'd be in the "Not Much" category.
Also, I just realized that I tend to assume it'd be me but it'd likely be worse if PiC were out of a job since he's got the good insurance and other benefits that we'd have to replace out of pocket or do without.
Abigail says
1-2 years? That's an impressive amount of savings. But when you have health conditions that limit how (if at all) you can work… You never quite feel safe. I totally get it.
I also should remind myself that we could raise the guest house rent a bit. We're giving them a darn good deal, considering all utilities (including phone/internet) are included. Now that Marc is getting a check, I wouldn't feel bad asking for more. If we needed it.
Revanche says
Well, I WANT 2+ years' worth saved but then I also have to figure out how best to stash it so it's not just losing ground to inflation. B/c after watching Mom's health decline so seriously and quickly, and how much stress it was for her being broke, well… I'm a magnet for Murphy's Law 😛
Definitely a good thing to keep in mind that you could raise the rent.
Abigail says
Yeah, I hate how much money we have just sitting in the account, but interest rates are so low that it just makes no sense to put it in CDs. And we need the money soon, so investing is too risky. (Over the long term, fine. But short-term? A dip in the markets could mean big problems.)
Budget and the Beach says
It would be tough, but somehow I find when you HAVE to do something, you can!
Abigail says
Yeah. Easier said than done when health issues are involved. But we do our best, certainly, because… there's not any other choice.
Donna Freedman says
Yes and no. That phrase reminds me of "God never sends us more than we can bear" or "If you think you can or you think you can't, you're right." While well-intentioned, they are a bit simplistic.
The unfortunate implication is something like this: "Even if you have serious health problems or a sick child/spouse, even if you live in an area where there is no decently paid employment, even if the cost of living has far outpaced your current earnings…well, if you don't succeed it's your own damn fault."
Again: People MEAN well when they say stuff like this. (See "road to hell, etc.")
Lance @ HealthyWealthyIncome says
I think about it quite a bit, probably because I write about this stuff, but I am in the best job and have the more security I ever had in my life, but one simple executive change or boss change and everything could come to an end. We have a supply of food, extra cash at home and in the bank. We are prepared for life. Everyone loses a job and has an emergency. That is always what happens so to think we are somehow exempt from bad things is a bad way to try to live life. It's not if, but when….might as well do something about it.
Abigail says
Yep, everyone is eventually at risk. We don't have a supply of food because we just don't cook — I know, I know — but we have some padding. So even in months I couldn't break even, it wouldn't actually create credit card debt. But hopefully it wouldn't come to that.
Punkin Pye says
I was just wondering why are you not eligible for unemployment, Abby. Are you considered to be an independent contractor? If you are, I can really understand your concern and I'm also really, really happy that your boss's business is doing so well.
This conversation really stirs up my bag lady syndrome. We have always had an emergency fund, but because of all my medical expenses and other pressing needs, we've never been able to save up the six to 12 months of income that is recommended….unless you want to look at our 401k as something we can break into in a dire emergency.
I have read a number of personal accounts of people who did everything right. They were educated, gainfully employed, budgeted, stayed out of debt, had 6 to 12 months of emergency savings, a 401k, and still wound up running through everything and becoming virtually homeless. Extended unemployment, plummeting home values, and/or catastrophic illness was just more than their resources could bear. I agree with Donna. In this country, many people are privileged to have enough options and resources to have a fighting chance, however it is folly to believe that we are bigger than any circumstances we could ever encounter. We can only do our best and put the rest in the hands of the Almighty. Basically, we are all in the same boat; it's just that some people's boats are bigger than others.
Abigail says
My boss hires me as an independent contractor. It's funneled through my S-corp, which I'm officially an employee of. But S-corps don't actually profit. Anything you make after salary and expenses is funneled in as basic income. Which means no state taxes for the company, so no unemployment.
Now that I know my actual monthly expenses, I may pump up our EF a bit so we can have three months' worth. I just don't want too much in there when we need to be saving for other things.
Sorry I amped up your bag lady syndrome. Try to breathe.
Michelle says
We have thought about what would happen with our emergency fund. It is not looking too pretty. We have to really work on contributing more to it.
Abigail says
Yeah, I think I'm going to boost up our EF a little bit. But it'll be incrementally, I think.