Expecting the Unexpected

Losing a job is stressful.
I lost a job once. I was a teenager and the fast food place where I was working wasn't doing very well. As a result, they had to lay off some workers. I was one of them. I didn't really care about the job loss. Sure, the money was decent (for a teenager). But I didn't have any expenses to worry about. There was no mortgage, no bills to pay, no credit card statements, or line of credit.

Now would be a different story if my job suddenly disappeared. While we don't have outstanding consumer debt, we'd still have the mortgage and bills we would need to cover.

Fortunately for wifey and I, we have some money in various chequing and savings accounts to cover a couple months of expenses. We also have some cash on hand for the extremely immediate expenses. For expenses that need to be covered after a few months of job loss, we could always sell some of our mutual funds (no fees, so this goes first) or ETFs (moderate fees, so this is next). Finally, in an absolute worst case scenario, we could sell all our investments if the job loss extends for (very much well) over a year. As bleak as the current job market is, it should (and probably will) never come to that.

This is also not factoring in the fact that our spending will be reduced. Although, I'm Loonie IT Guy, I'm not delusional. Without a 2nd income, certain expenses will need to be cut down. Personal budgets? Slashed. Car insurance? Don't need to commute anymore, slashed. Gas? With only one car in use, slashed as well. What about electricity? I'll be home more often now that I'm jobless. Well, the in-laws are at home during the days anyway. It shouldn't change that much. I could always bike to the community centre and partake in the free WiFi if I bring my laptop. In fact, I could also do most of my job searching at the community centre and act as if it was my job. I just have to watch out for dancing seniors*.

Dipping into savings and investments will definitely set back the retirement plans, but it's better than going into consumer debt.

Wifey knows a couple of people who have lost jobs recently. Both received generous severance packages. One received 11 weeks of salary while the other received 6 months of salary.

The one that received the 11 weeks of salary, cut down her family expenses. Fortunately for her, her husband has a stable career with the Federal Government, so they didn't need to dip into their savings as his salary covered all expenses. She's been out of work since December, but they haven't had to go into consumer debt. In fact, their family recently came back from a trip abroad at one of those Eastern European countries. She still stresses over not finding a job, but I think it's a work ethic thing more than a financial thing.

The one that received the 6 months of salary kept spending money as if he had a job. Unlike the first couple, his wife's salary was not enough to cover the expenses for the household. If anything, his spending increased! Now that he had more free time at home, he was renovating their house. In order to transport the renovation materials from Home Depot and Lowe's, he bought a pick up truck. In his spare time, he bought another motorcycle to add to his fleet which currently stands at three. In total, they have five vehicles. He's also the only one who drives! He lost his job in March so the severance will run out soon**. He too has been looking for work, but it sounds like the wife is the one stressing over the finances. She thinks they will lose the house when the money runs out. Did I mention they also got another dog? Yes, one on top of the other one they already had after he lost his job.

Wow! Even typing that caused my stress levels to rise.

Those were two different (yet very real) situations when dealing with job loss. One couple spent less and are still living comfortably. They even managed a family trip once the school year was done. The other couple continues to spend and spend even more than before the job loss.

I don't see how second couple will be able to keep their house unless he gets a job this very second. From what I've seen, divorce is also a real possibility. For their sake, I hope things work out. Realistically, they'll be forced to sell their house (which they bought last year) and go back to renting an apartment. I hope they manage to find one more pet friendly this time.

Anyway, as people seeking early retirement, job loss shouldn't be that big of a deal. We're already spending less money on things, so each dollar earned from the other income will stretch farther. Of course, if you're a one income family, you'll probably need to have an emergency fund. Some people advocate 6 months of expenses. I don't know what is correct as every family is different. If you have money in investments, you probably only need 1 or 2 months expenses. If you spend all the money you have, you should definitely keep 6 months of expenses.

At the very minimum, spend less and only buy needs when faced with job loss. It can happen suddenly and out of the blue (remember 2008?), so you'd want to be prepared for when the worst happens.

*According to the mother-in-law, there's a group of dancing seniors at the community centre. Apparently, she participates occasionally as well.

**From my understanding, he will be collecting Employment Insurance (EI) from the Government after severance runs out. This will dramatically reduce his take home pay as EI is 55% of take home pay.


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