It may feel like every day, you hear of another friend or family member being laid off from their job. With so many layoffs happening right now, you may wonder if you are really prepared if you were to lose your job and if you have enough savings to get through a period of unemployment.
One of the pieces of financial advice Planning Bucket gives to its clients most often is to save up for emergencies and to have an emergency savings plan in place. It’s a good idea to have an emergency fund in your bank account dedicated to offsetting the cost of an unforeseen situation, like a layoff. This account should serve as a safety net and only be used when an emergency occurs.
Financial advice professionals agree that how much you should keep in your emergency fund depends on your income, dependents, monthly costs, and lifestyle. But the general rule of thumb is that you should have at least three to six months’ worth of expenses saved up. Although getting to this amount may seem daunting at first, start by putting away a little bit every time you receive a paycheck to get to this goal.
It is best to keep your emergency savings fund in an interest-bearing bank account that you can access easily without incurring penalties or taxes. Keep this money out of an IRA or a CD, so you do not face any early-withdrawal penalties.
Having an emergency savings plan in place and knowing what you would do in case of a job layoff is something you should think about. Please reach out to Planning Bucket to complete their questionnaire, so they can provide you with more information.