Most financial advisers would suggest saving enough money to cover between three to six months of basic living expenses in the event of job loss.
Many are starting to do just that. According a survey released by the AARP earlier this month, eight out of 10 adults have trimmed spending or started saving in the past 12 months in an effort to prepare for potential unemployment.
But with the unemployment figure possibly rising to 10% or above (presently it’s 8.5%) and available jobs becoming scarcer as we move forward in the year, should everyone start saving for a much longer period of joblessness? Possibly prep for as much as 12 to 18 months of no work?
That is what one reader is suggesting and she speaks from experience.
No stranger to unique difficulties, this victim of the dotcom bubble burst is advising to save a bit more now as you never know how long it may take to find a new gig.
“I learned in the Web bust of 2001 that unemployment/underemployment is tough. More importantly, I learned that 3 months of living expenses in the bank is a joke when your industry is decimated. 18 months of living expenses in the bank is a better bet. Pass the news onto those who can perhaps make their unemployment/underemployment less emotionally taxing.
I say 18 months from experience. When the dot com I worked at imploded, the industry was also decimated with my confidence. My back-up job plan – working for a consulting company – was no longer an option. There were no jobs with the title "business analyst, operational efficiencies" in other industries. My three months of living expenses were spent – then I received a verbal offer that was later rescinded after September 11th occurred.
After 9/11 in NYC, no one wanted to extend an interview in my industry unless you had done the job before. After a year of unemployment I was looking at entry level sales jobs that paid $30K or 25% less than I earned my first year out of college and less than 50% of what I earned at the start-up. To escape the lack of opportunities in my city, I went to graduate school. Live and learn, but I do not wish my experiences upon any of my enemies. Save, save, save….
It is even worse if you have a family - imagine your entire unemployment check going for your family health insurance premiums.”
For those who have already lost their jobs, how much, if any did you save in preparation? What have you done about health insurance?
If you still have your job, have you cut back on spending? Are you using your tax refund to start a savings plan?
I'd like to hear from you about your saving methods.
Email me at email@example.com.
Michael Arceneaux hails from Houston, lives in Harlem and praises Beyoncé’s name wherever he goes. Follow him on Twitter.