This past year was a whirlwind of events. Becoming unemployed was something I never imagined I would go through. The first lesson I took away from being unemployed this year is the importance of savings and that no one (including me) is immune to hard times.
Things can happen unexpectantly that you can’t control. You can, however, control your perspective and how prepared you are before they happen. Here's my story of how I survived being unemployed and what I learned.
What happened when I lost my job
I couldn't believe I lost my job. I didn't have a backup plan and had zero job prospects. And so, I had no choice but to tap into my savings safety net, which would only cover three months of my living expenses. What could go wrong?
My three months of cash for living expenses went by quickly, even after spending a few weeks at my parent’s house camped out from the world. I needed more time and more money. This was a key lesson in the importance of savings because I realized how quickly I went through the money.
Cashing out my investments
So, I made a 911 call to my financial planner and withdrew money from a fund I had invested for short-term savings. I also got a part-time job too. This allowed me time to finish publishing the book I had been working on.
When summer came, I had a book and more direction in my career, so I quit my part-time job and started applying for full-time jobs again. I thought I would have a job by the middle of summer, but that didn’t happen.
Again, I needed to tap into another short-term savings fund I had been building for a new car or a wedding. Slowly, all my savings were disappearing.
What I learned about my finances and being unemployed
It still pains me to admit that I had to take money out of my Roth IRA just last week. I have lived by every finance rule, and now, I've broken every finance rule.
Before I lost my job, I didn’t understand why people couldn’t save or pay off debt, but now I do. I have more compassion for people that are in a tough spot.
I understand the importance of savings and how being debt-free is essential to unforeseen events. Life happens to even the most prepared and financially secure, and suddenly every rule goes out the window when you need to survive. I totally get it now.
The importance of savings
I would not have accomplished what I did if I had debt or didn’t have savings. I’m proud of myself that I was able to survive a year on my savings. I went on trips, spent more time with my family, and continued to live my life. I just ate more homemade meals and didn’t go shopping.
I’m choosing to have a positive perspective through it all. I have hard days, but I can see how others will benefit from my life experience. If people learn the importance of savings after hearing my story, then all I’ve gone through was worth it.
How to prepare for unemployment by focusing on the importance of savings
So, now that you know the importance of savings and how I was able to live a year without a job, here are some tips to prepare you in case you would lose your job.
1. Pay off debt
If you can make progress paying off your debt, DO IT. Get rid of it. Trust me; it comes in handy. Being debt-free takes a huge financial burden off of you. Create a debt reduction strategy and try to knock out your debt as soon as possible.
2. Build your emergency fund
So, you know the importance of savings but may feel you don't make enough to actually save as much as you need. If you have a job (even a low-paying one), put money aside with every pay period. It may surprise you just how fast it can add up.
When you need it, you’ll be glad you have it. Calculate three to six months of essential living expenses and make that your goal. Building your emergency fund can help you in unexpected events, such as being unemployed.
3. Contribute to your retirement savings
It's important to make regular contributions to an IRA or 401(k). I learned that because I made contributions to my Roth IRA, and since it’s been open for five years, I could take out what I contributed without paying a penalty charge. However, bulking up your emergency fund can prevent you from tapping into your retirement savings accounts.
Knowing the importance of savings can prevent financial mishaps
My goal in sharing my experience is to teach you the importance of savings and encourage and motivate you. If you face some similar to what I went through, remember, you will get past it.
Prepare for unforeseen events such as being unemployed by bulking up your emergency fund, paying off debt, and finding ways to make money without a job.
Do you need some help preparing? Learn how to ditch debt, save more money, and build wealth with our free financial courses!