Wednesday, March 10, 2010

What Would We Do If We Lose a Job?

I responded to a very interesting post at Darwin's Finance last month. Darwin was thinking about which expenses were unnecessary and could easily be cut in an emergency. I quickly listed off what my husband and I talked about, but I've changed my mind a little over the last few weeks. Here was my original list but I've crossed out the two things that would only be cut if we were in dire need:
  • Gas $40 – No more driving to work.
  • Mortgage Overpayment $160 – We would only pay the $740 due instead of the $900 we’ve been paying.
  • Massage Envy Membership $49 – My husband loves it but agrees it would go first.
  • Vacation Account $250 – That’s how much we put in a month to take a couple of annual vacations.
  • Eating out $100 – We’ve only eat out a couple of times a week now and would cut that out. Last year it was 4-6 times a week, but we started cooking mainly at home in 2010.
  • Entertainment Expenses $50 – We don’t go to the movies or participate in many paid activities, so that’s as much as we could cut. We’d still hang with friends, have potlucks, and board game though.
  • “Fun” Money Allowance $150 – We each get $75 to just spend every month.
  • Biweekly Maid Service $90 – I love Jacquie and would invite her over for dinner, but we would have to cut this cost.
  • Newspaper subscription $6.50 – We pay $19.50 for 13 weeks of the Houston Chronicle…I use the coupons but we don’t need them. I’ll buy more from Angel Food Ministries.
  • Groceries $100 – We could cut back to $300 or less a month if we needed to.
That’s all we could cut and still be happy. That adds up to $995.50 and includes cutting back on our extra mortgage principal payments.
If we were about to starve, I’d stop contributing up to matching in my 401k and stop maxing out our Roth IRA to save $575 a month.

We could probably get rid of cable, internet, and our cell phones for a total of $160 a month…but it would be hard to get a job without the internet and a cell phone and I don’t want to live with my husband if he doesn’t have cable.

I realized we would need the internet and cell phones more than ever since job hunting would be freaking hard without them. I also came to the conclusion that we need cable or Netflix or we'd go nuts.

Finally, I decided we wouldn't let go of our housekeeper, Jacquie, unless we really were close to losing everything. We are one of her few remaining jobs due to this absolutely wonderful economy...I'd literally be taking food from her mouth. I just couldn't do that unless we were in real trouble. So Jacquie, if you ever read this, thank you so much!

I loved Darwin's idea for this post! It helped me prioritize even more than I usually do. What would/could you cut? What would be really hard to give up?


  1. I've read an article or two during the recession where people had been laid off and made no adjustments to their speding patterns. They were nearing the end of whatever severance they had received, but had not found another job. I had very little sympathy for them.

    Since my wife and I rely soley on my income, a job loss for me would be painful. I don't yet have my emergency fund at the 6 months worth of expenses, so things would get tight in a hurry. We have talked about such an event and essentially anything not mandatory (mortgage, electric bill, food) would go and would stay gone till I found a job. I don't spen money now to keep up appearances and won't do it when I'm unemployed either.

  2. Since my husband makes a little more than me, my worst case scenario is if my husband were to be laid off. I would:

    -lower contributions to my retirement to 250 (currently around 810 each paycheck because I am anticipating nothing being taken out during maternity leave... will adjust later if close to hitting the 401K contribution limit). 1370
    -stop contributing to the e-fund and prepaying mortgage principal. 3200
    -stop giving to charity 250
    -get rid of lawn mowing service (84 a month budgeted to this in a sinking fund)
    - have to add in the health insurance and dependant care FSA benefits to mysalary (about -720 a month)
    -decrease eating out by 200 for my husband and 100 for me --> total 300
    -decrease gas by 80 because he would not be commuting to work
    -decrease contributions to my daughter's 529 by 125.

    If I just did this, we could live off of my salary with an excess $4 a month. Total less "spending" would be 4689.

    If I were to be laid off, we would have an extra 720 a month because my husband already has the insurance and FSA taken out pretax. I don't usually count it in our budget because I actually calculate everything by net pay after everything pretax is taken out.

  3. MikeS, I don't think you two have much to worry about. :-)

    I like the fact you also think it's weird that people don't change their spending when they're unemployed! Two of my friends were laid off last year and neither one changed anything! I asked about it and they said, "Oh, something will come along". Ugh.

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  5. Julie, DARN GIRL! You could cut out almost as much as we take home! Wow!

    I think it's awesome that you'd only really have to cut savings and be ok. That's exactly where everybody would hope to be. Congrats and hope everything stays as planned!

    Sorry, but I have to say it, You Go Girl!

  6. BFS, Thank you for posing this question as I had never done this scenario on our budget. I always maintained that we could live on my salary, but never crunched the numbers. When my husband heard this, he was really happy. There is something about having the option of not working that just makes things less stressful. I always "knew" in my head that either of us could be a stay at home parent if we really wanted to, but, to him, numbers make more sense so it really hammered it in. Fortunately, we both love our jobs so this is more of an exercise than anything else.

    I am a bit hesitant to post our budget because my husband and I essentially do live on one income and save the other, but we have some "fun stuff" in there that some people would not agree with.

    MikeS, I don't understand why people wouldn't change their spending when they are laid off. Wouldn't they want to save some since they have no income coming in?

  7. BFS, thanks. :-)

    Julie, I think it was denial. They all seemed to think everything would be fine and that they would find another job. A couple were even nearing the end of their severance benefits without a care in the world. I guess it's just a different mindset.

    I would try and find another job as soon as possible. Then you get to treat your severance like a bonus, rather than have it be your salary.

  8. Julie, I'm so glad I actually helped! I like seeing the numbers too. Wow, it feels really good to actually be helpful, you know?

  9. Our budget doesn't have much wiggle room for cutbacks. I came up with only able to cut out about $330. This is why living paycheck to paycheck stinks! Once we pay off the credit card debt we will be in a MUCH better cash flow situation. The good news is my husband would get a 6 month severance to at least lessen the blow in the event of a job loss. If the economy is still bad, I could go back to work and he could be with the kids (and collect unemployment) until he found a similar paying position.
    It is a great idea to hope for the best but prepare for the worst!

  10. sahm CFO, that 6 month severance cushion is awesome! If I get laid off without cause, I get one week per year of employment (5 weeks right now). Yuck.

    Good luck on that credit card debt!

    Please tell me if there's anything I could post about that could help. The blog Money Relationship is by a guy that's working down about $150,000 of debt, but he posts on Frugal Dad more often than he does on his own site...