3 Steps To Help You Prepare For “What If?”

Last year my husband and I faced a troubling burden — my husband was laid off. Sure, the signs were on the wall, but it still came as an unexpected blow one afternoon when my husband arrived home from work in the middle of the day.

Things already felt tight prior to financial pitfall, and we had a new baby. We were getting by, but without my husband’s paycheck… Uncertainty set in.

After a few days of moping about the whole thing, I went back to basics. I broke out my trusty spreadsheet that I keep with our regular household expenses. (Oh yes, I actually keep a spreadsheet.) Where could we cut? What could we live without, and what was the bottom-line number that we had to come up with each month to pay our bills?

I spent time doing some serious thought and number crunching, finally I created a multi-step plan. I made initial cuts, and then I had a second tier of cuts that could be made if a new job was not on the horizon within a month. Then a third and a fourth tier.

I double checked and triple checked our savings to see how far it would get us. Luckily, I am a squirrel and I have been squirreling away money into our savings since the day I graduated college. It wasn’t always a lot, but over time — I had an emergency reserve we could draw from.

And, of course, I ran the numbers on my own income. How could I make more? What if I looked for a part- or full-time job outside the home? How could I contribute?

It wasn’t a pretty picture, but there was hope. We had savings, we had my income and we had a plan.

Within three months, my husband found a job. A steady job that makes him happy, which makes us all happy. We were lucky.

One year later, we’ve added back most of the things we cut out (some we decided we no longer needed), we’ve started to rebuild our savings (at least a little bit) and I have returned to my squirreling ways. Things are sunny again.

The thing about a financial emergency is that it can happen at any time and come in any form – a lay off, an accident, an illness or a natural disaster. You can’t know what lies ahead, but there are steps you can take to be more financial secure in case “What if” comes to pass.

  1. Know what you needWhile nothing about being laid off is easy (or fun), regularly keeping track of monthly household expenses put me in a better position to analyze what we needed to get by. Add up all of your regular monthly expenses (yes, on a spreadsheet) and calculate your monthly nugget – the amount you need each month to cover the basics.
  2. Save what you can, when you can – Financial experts suggest that you should have an emergency fund to cover three months of your household expenses. But saving three months doesn’t happen overnight. Don’t let that number scare you. Start small, start with what you can save — even just $5 this week. By putting $5 this week into an emergency fund, you have taken the first step. Once that step becomes easy, increase your savings to $10 a week. Little by little, dollar by dollar.
  3. Make a plan and stick to it – While I had a budget and savings in place, when the news came I literally had no idea what that meant for us financially. That led to some internal panic. If I had created an outline of a contingency plan for “What if” in advance, I would have saved myself some restless nights. Going forward, I now have a bare-bones plan in place that can be implemented immediately. I feel better about the future knowing I am ready with a plan in case “What if” strikes again.

The bonus upside to saving for all of the “What ifs” in life is that each year they do not come to pass, the money you set aside instead becomes money put aside for your future. It’s like a savings security blanket for retirement. Genworth has some great resources available to help you get to retirement.

If you don’t have a plan in place, today is a great day to start one. It’s overwhelming to think of the big picture, so start small. Start by knowing what you need. Once you know where you need to be, it will make getting there a whole lot easier.

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