Start a financial plan to be secure by positioning yourself for a job loss in advance by answering the tough questions.
In mid-February 2025, I was laid off unexpectedly from the online job I’d held for 10 years. The news was both a psychological and financial blow, and it dropped our income by two-thirds nearly overnight.
Losing a job is terrifying. The end to a predictable paycheck opens the doors to vulnerability. Debt starts to loom, your future plans are put on hold, and all expenditures are now up for negotiation. The sense of your very home as a refuge diminishes with the dread that it might be snatched away at any moment.
After staggering around in shock for a few hours, my husband and I held an economic summit. We took a hard look at our weekly, monthly, and yearly expenses, assessed our remaining income, and then prepared to tighten our belts. We completely altered our spending habits and reduced or eliminated many expenses.
Looking back, the job loss closed a door but opened several windows. We were able to shift gears by revving up some sideline freelancing gigs. As a result, we’re doing fine today. But I also realize the main reason we could make this pivot is because we spent years unknowingly positioning ourselves for just this scenario. Think about it this way: Very few people manage to get through their working years without losing a job, sometimes more than once. (How many folks in your life have been spared?) For this reason, we all can adopt a less risky way of living that slowly but surely prepares us for when the inevitable happens.
Confront The hard Questions head-on
Advice on handling a job loss tends to focus on the mental adjustment necessary to recover and move on. Seldom do you read about what to do before losing a job – even years before. But by positioning yourself in advance for losing your income, you’ll continue to thrive.
Collectively, I term positioning techniques “low-cost living” and consider them multiyear processes; the sooner you begin, the better off you’ll be. Start by asking yourself the following questions.
The Big-Ticket Moves
- Can you move to an area with a lower cost of living? Despite across-the-board cost increases, some parts of the country remain far less expensive than others. Mortgages are more affordable, property taxes are lower, and daily living expenses are less. Of course, not all jobs can be done remotely or transferred to a new location, and not all people want to uproot, so this possibility isn’t in reach for everyone, but it can be powerful for those who can swing it.
- Can you start a side gig? I’ve found that depending on one income stream is dangerous. Having a few economic “irons in the fire” hedges against times when one income drops unexpectedly. Being able to heat up other irons and start to earn money quickly helped me survive a job loss.
- Can you learn skills? Activities, including from-scratch cooking, carpentry, sewing, plumbing, canning, and welding, can save huge amounts of money, as well as provide you with a potential new job.
- Can you learn frugality? The ability to pinch pennies is an underrated but critical skill for preparing for a job loss. Frugality is, quite simply, one of the most powerful tools in anyone’s financial arsenal. Consider it more than a mindset; it’s a practiced skill with a self-styled rulebook.
- Can you get out of debt? The American lifestyle is built on owing money: student loans, mortgages, credit cards, auto loans – the list goes on. Getting out of debt is one of the best long-term strategies for achieving financial security. It’ll usually take years and its own dedicated game plan, which is why you should start now.
- Can you live an all-cash lifestyle? Tapping or swiping a card is too easy and often leads to impulse purchases. For this reason, credit card debt can be pernicious and devastating. Forgo points and freebies (are they free in the end?) to instead pay with cash or use a debit card.
- What’s your quickest way to accrue a financial cushion? Experts suggest having a minimum three months’ worth of living expenses put aside for a reason: That pot can be a lifesaver during a job loss. Our method is to skim 10 percent of any income, no matter how large or small, to put into savings. The technique is relatively low-impact and has saved us more than once.
Making the Cut
- Can you avoid purchasing or sell expensive items that get relatively little use? An RV or a boat can put you in a financial hole for years, and most people don’t use them nearly as often as they think they will. It might be cost-effective in the long run to rent these items a few weekends a year.
- Can you trim smaller expenses? Paychecks aren’t just eaten up by big-ticket expenses; they also “die by a thousand cuts.” Most people have plenty of clothes yet buy more. If you have a functional kitchen, reduce meals eaten out by a specific number each week.
- Can you give up your vices? Vices (and you know yours) are costly, often unhealthy, and antithetical to low-cost living. Get help if you need it; the cost of a cure is cheaper in the long run than years feeding the vice.
- Can you scale back your entertainment? From shopping to streaming services, examine your fun with an eye toward whether you could afford to continue these expenses if you lost your job. If the answer is no, then ditch the expenses now, and learn to entertain yourself without paying for it.
- Can you transition away from disposable products? The average American throws away 1,500 pounds of trash per year (a quarter of it food), equating to thousands of dollars’ worth of disposable products, from paper towels to disposable diapers. We’re talking 3 million vapes and 350 million coffee pods every week across the country! By replacing disposable products with reusable or washable versions, your long-term costs will be negligible.
Looking withIn
- Can you adjust your attitude? This is arguably one of the most important factors. If you look upon frugality as a grim and depressing struggle, you’re not likely to continue. If you look at it as a creative challenge and a positive example for your children, your chances will improve.
- Can you put aside your ego? The money we spend feeding our egos is astounding. We try to impress others with how successful we appear. Disassociating ego from consumerism means undoing decades of earlier training that contentment comes from purchases.
- Can you resist temptation? Whether or not we like to admit it, many of us tend to spend what we make, which is why we live paycheck to paycheck. Distinguish needs from wants, and be able to give up the latter during a job loss.
- Begin the process of positioning yourself for a job loss now, even if you think your job is completely stable. This means you won’t lose the basic necessities of life when your primary income source dries up. And if you’re fortunate enough never to experience a job loss, following this advice will still put you in a better financial position in the long run.
