Being unemployed can be terrifying. We all have financial obligations to meet and not having a job for even a short period of time can sometimes cause some serious damage in our lives. The good thing is, if you’re even reading this, the odds are you’re still employed.
Unemployment can happen at anytime. Layoffs can be sudden, some of us take a break to travel, while some of us can be forced to take time off due to health reasons. With the Canadian economy slumping, maybe now is a good time to prepare for unemployment. Some would even argue that the best time to plan is when we’re still employed since we’re still getting paid.
Unfortunately I work in a business that has been slow to adopt to technology. The good thing is that most of my peers who have been laid off end being better off, but that doesn’t make the experience any less stressful. I have no idea if I’ll ever be let go, but I’ve taken the following steps to prepare for unemployment.
Have an emergency fund
Having a decent emergency fund in place is the best way to prepare for unemployment. But how much is decent? Well that’s a subjective question, but the standard answer would be 3 – 6 months of living expenses that you can easily access.
If we’re confident in our skills then 3 months of expenses might be enough to get us by. However, since the economy is slumping, 6 months might be a safer bet. Of course having that much cash readily available can be tough so we need include our emergency fund in our budget until we get it to a number we’re comfortable with.
Some people suggest investing that cash and to just use a line of credit if a real emergency comes up, but I never understood the concept of borrowing money to get out of a financial emergency. That to be sounds like a disaster waiting to happen.
Have a side hustle
If you’re unfamiliar with side hustles, it’s something that makes us money that isn’t our main job. For example, I freelance write about personal finance and travel which brings me in a little extra income each month.
What makes side hustles so lucrative is the fact that it’s passive income. If I were ever to be laid off, I know I would at least still have a small amount of pay coming in which would help with any cash flow problems. Presumably I might even be able to pick up some more work which would buy me some time while I figure out what to do next.
Side hustles usually start off as a hobby, but if you really think about it you could make passive income from just about anything. Tutoring, teaching yoga, dog walking, graphic design, personal training are pretty popular ways to make side income, but there are plenty of other ways to make more money if you get creative. You can even signup for Harris Poll Online and earn merchandise and gift certificates; it’s not cash, but it’s still free stuff.
Improve your skills
If we want to prepare for unemployment, or avoid unemployment altogether, then we need to constantly improve our skills. This should be obvious, but the more skills we have, the less likely our employers will want to get rid of us. With technology changing, many jobs that were once secure have started to change, by learning more skills, we make ourselves more valuable.
Improving our skills doesn’t even need to apply to just our current employer or industry that we work in. Why not pick up some other skills that could make us much more employable somewhere else? Social skills are just important, I know it’s hard to say that to introverts, but knowing how to network may potentially lead us to our next job.
Of course there’s also employment insurance available to Canadians who have lost their job through no fault of their own. Employment insurance benefits are temporary and they pay a taxable benefit up to a maximum of $524 per week so its not something we can depend on long-term.
If we’re seriously concerned about losing our jobs then there are some other ways to prepare for unemployment that we should consider. Cutting back on spending is a good start and that includes delaying any large purchases. This reduced spending will not only increase our savings immediately, but it’ll also help us prepare to live on a lower income.