An Emergency Account Can Cover Job Loss

Do you have any financial margin?

If you lose your job today, how long could you cover your expenses? Let’s do some calculations. Total your fixed living expenses. Include your rent or mortgage, utilities, insurance, car payments, and essential expenses like child care, cell phone service, property taxes, and loan payments. Ideally, it’s less than 50% of your pretax monthly income. Now, add the monthly cost of groceries, gasoline, and other necessary expenses. This provides the total you need each month. Then, divide the money you have on hand by the dollars you need each month. That’s your financial margin. For example, if you have $5,000 and you need $2,500 a month, you can go 2 months without a job.

For most Americans, a job loss is a major strain on their finances. That’s why I can’t overemphasize the importance of having an emergency savings account, and you fund one by living beneath your means. It’s a learned behavior gained from weeks and months of practice. It grants margin, provides security, and lowers your stress. Once you pass the initial stage of self-denial, you’ll find that financial margin is more rewarding than the spending you once enjoyed.

Here are a few tips to reduce spending that’ll help you fund an emergency account. First, live on a budget. Then, negotiate insurance and cell phone plans. Sell items of value that you can live without or take on a part-time job. If you need to reduce even more, consider moving or driving a different car. You can cover a job loss by funding an emergency account!

And if you need help, check out our budget coaching program. Go to crown.org. Click the Get Help Now tab. You can start today at crown.org.