Wednesday, February 04, 2009

Do You Have a Crisis Plan?

What would you do if you lost your job or had some other sort of financial crisis? What would be the first thing you'd give up?

I was thinking about this the other day when Sweetie and I were joking about whether we'd move in together if either of us lost our jobs. I have savings I could live on for a while if I lost my job, but I don't think I'd want to count on them. Since I live in a 2-bedroom apartment by myself, I think the first thing I might do would be to get a roommate-- I could probably get $800-900 a month, or maybe even more. That would make a big dent in my expenses, and though it would be a big lifestyle shift, I could probably handle it as I'm spending less time at home these days anyway. If things came to the point where I really did decide to move in with Sweetie, then I'd consider selling some furniture and putting a few things in storage in order to make it work.
As an aside here, I don't think financial necessity is a good reason to move in with someone, but I'm sure it is often a big part of the decision!

What else would I do? I pre-pay my gym membership for a year, and though I really wouldn't want to give it up, I'd consider suspending the membership or letting it expire. I'd definitely cut back on restaurant meals and takeout and be a lot more careful with my food shopping. I might give up my land line and just use my cell phone. I'd give up my French lessons. I'd be careful about all other incidental spending, such as clothing, magazines, etc. But all of that would be far less significant than changing my housing situation.

Sweetie said "ugh, a roommate? That wouldn't be much fun," when we were talking about this. My response: "well of course it's not much fun! It's a CRISIS plan, and it's supposed to just be temporary." I'm lucky to live in a place where I could rent out an extra room, and lucky to have someone who could handle me moving in-- not everyone has this kind of flexibility. But in other areas, I feel like my expenses are relatively low and I don't have much room to cut back-- I can't have a lower cable TV bill than zero, for instance.

How about you? Do you have options to make major changes in your lifestyle if circumstances demand it?

13 comments:

Chiot's Run said...

We've already cut our expenses pretty much to the bone to save money. We do have a healthy emergency account though, so that would help us weather the storm. We are currently trying to pay off the mortgage and if that happens we would be able to survive for quite a while on our emergency fund.

Anonymous said...

We (my husband & I) had the same discussion. Living out of the country we're even more cautious because we wouldn't receive any government support should it happen and we have no family or friends nearby. Our 'emergency fund' basically gets us moved back home with the 'rents. We've pretty much have cut down as much as we can. If only one of us lost our professional job we've calculated that a basic 'service' job would be enough to at least pay the rent & bills (if we defer one major student loan as well). We may be eating beans & rice and not going out AT ALL, but we'd have a roof over our heads...and more importantly eachother.

Adrienne said...

Mom.

Slinky said...

My fiance and I could pretty much live on only one of our salaries if we really had to. We might be a little over right now, but that will decrease as time goes on and we pay off the debts we have. I could also defer my student loans which would help. We both also have a few thousand dollars set aside in case something happens.

So as long as both of us aren't out of work for more than 3 months or so and there aren't any catastrophically expensive or income limiting medical problems going on, we're pretty good.

T'Pol said...

Having no consumer debt and a good size emergency fund, I can get by at least a year if not more. I have a humble life style and I would take further measures such as cancelling cable, cancelling cleaning lady, never eating out, never purchasing a vehicle ( I currently drive a company car, expenses covered by the company) and using public transportation only. My utility bills are already as low as they can get. Sure I can drop ADSL but, in my job search, it would be a necessary tool.

The extreme case would be to move in with mom, put my stuff in storage and rent my apartment out. Then I would probably get by for more than two years.

Of course I do not want to lose my job or quit without finding a new one because I am 4-5 years away from total financial freedom.

Anonymous said...

Maybe it's just me, T'Pol, but I don't think that having a "humble lifestyle" usually includes having a cleaning lady. I'm not saying that you're living a lush life but I think that a lot of readers forget how good they have it b/c they've had it so good for so long. I know that this isn't the appropriate time or place for a rant and it's not even that directly related to what T'Pol said, but...some people need to wake up and remember that their life isn't hard just b/c they can't continue paying for their gym membership or buying their produce at Whole Foods. Big freaking deal.

If you're really in a financial crisis, and it's truly a crisis rather than an inconvenience, then you wouldn't need to consider which luxuries to keep and which to cut. It's a crisis! Cut them. They're luxuries. Even internet access is a luxury. You can always use it for free at the library.

The truth is, anyone that has an emergency fund is already ahead of the game. Loads of people don't have one and can't afford to start one. Every single thing they have goes towards paying for their current necessities. Be thankful for what you have and recognize that inconvenient cutbacks are not actual hardships.

Staci said...

What an excellent question - a bit scary for us. I stay at home with our 3 kids, and my husband works for a business based on donations. So this crisis could be at hand for us. We have already cut many luxuries, so that I could stay home. However, one of those luxuries might be staying home. If my husband lost his job, he might be the one to stay home if he couldn't find new work.
The hardest part would be that by the time the crisis would hit, everyone else would be looking for work at the same time.
Thankfully we do have an emergency fund in place.
But how much of an emergency do you need to have before you touch the retirement fund?

lazybride said...

we'd cancel our wedding and have a surprise picnic celebration at the family reunion (something we should have done in the first place)

I think we'd be okay on one salary for a while, our rent is cheap for manhattan (rent stabilized) and our expenses are already pared down because we've been saving for the wedding.

frugal zeitgeist said...

I can sit out the job market for a while before touching investments. I have enough cash to last about sixteen months; with severance, I could spin that out to about two years. Beyond that, I'd have to dig into investments, but I could hold out for another couple of years if I really had to.

T'Pol said...

I agree with anonymous generally but, I do have a humble lifestyle when compared to my peers. I have a 19" TV bought in 1991, a 23 year old washing machine my mom gave me. I bought my cell phone in 2006 and I never replace anything before it is beyond repair.

As for the cleaning lady, in my country, it is not a luxury at all. I pay her about 45 USD each week (not for an hour, for the day and this is the pay scale in my country. It is enough to feed her family for a week to give you an idea as to how much it really is. She also goes to other people and work 5 days a week) and she needs this job to support her family. This is not charity, she earns her pay but, I would feel miserable to part with her just to be more frugal because that would seriously hurt her. 180 USD a month for cleaning is perhaps my only indulgence other than dining out 2-3 times a month. In a true crisis, I would cancel her but, in my situation, it is really not an issue.
BTW, using internet at a local library is not even an option. I always envy your library system which we do not have here so, being an avid reader I actually have to pay for my books or borrow from friends. Every country is different...

pkzcass said...

My husband is a police officer, so his job isn't going anywhere. Thank goodness. He handles all of the finances, and he's a saver, so I think we'd be okay if I lost my job. But I'd definitely keep working regardless of what I had to do. I'm lucky because my kids are getting older and daycare wouldn't be an issue. Also, we've always lived in a moderate house and our mortgage is manageable. We now own both of our cars and have very little credit card debt. Plus, I dogsit off and on and my husband has a part time job as well. Still, I worry anyway...

candiddani said...

Just ran across your question today, and it's very timely. This afternoon I gave a talk to my eye doc's staff about how I got out of debt and money-saving tips. I need to use them myself again, because I have been laid off! I have a few months to finish a special project before it goes into effect, thankfully. Once I factor COBRA expenses into the monthly bills, I have enough with severance for a couple of months, maybe 4.

What would I give up? Alcohol, my hairdresser (that's already in the works), waxing (I've switched to tweezing for the eyebrows), major-brand foods for generics, pre-made meals in favor of learning to cook from scratch, Kona coffee, buying books. I do utilize the heck of out of my library and the local flea and farmer's markets, but there are more things I could get there than I do now.

Crystal said...

Technically, we have a 6 month emergency fund just for this, but we wouldn't want to use it...

We already rent out our 3rd bedroom, so that would not be an additional help. You can tell your sweety that it isn't that bad as long as they have their own bathroom, otherwise I could guess that it would totally suck. We do not have a land line, so I think we would have to keep our cell phones.

So, we would end up cutting our cleaning lady ($80 per month), Massage Envy membership ($50 per month), stop eating out as much (maybe save $200 per month), and maybe cable and internet ($110 per month). But cable and the high speed internet would be a last resort since we do not have any other regular entertainment expenses...that's our key to living cheap and being able to vacation once in a while (which would obviously not happen during a crisis).

That is pretty much all we have to cut...the rest is actual bills like the mortgage and car loan...we may then have to look at scaling back on the ROTH IRA or something, but I think we would use the emergency fund first.