What To Do When Your Nest Egg Cracks

With the current economic crisis over the past few years, many people have lost their jobs.  Five years ago, some people may not have cared too much about losing their job. Back then, there were plenty of available jobs in the job market; and people had savings to use as a bridge to get them over the troubled waters of temporary unemployment.  Nowadays, finding a new job, especially a job with the same compensation is rare, and people need to dip into their savings.

Don’t be discouraged if you find yourself using your savings. That is what savings are for. It is always good to save for a goal, but some people save just for the sake of saving.  It is said that an emergency fund should be the equivalent of three months of our basic monthly living expenses. This was set as a rule because generally it took approximately three months to find another job with a similar annual income. However, nowadays, this is not always the case.

Professionals (especially in finance) are having a hard time finding another job that lives up to our high standards.  I can only speak from personal experience but generally people who work with money are obsessed with money. Personally, I am not totally obsessed with money but, everything in my life does revolve around money.  My friends also all work in finance and therefore we are at ease with talking about, and discussing our personal financial situations. People can be unemployed for over a year if they don’t want to accept a lower paying job because they feel they are overqualified.  If one day we find ourselves unemployed and jumping in the puddle of our rainy day account, we should remember not to panic.

The first thing that we should do anytime something doesn’t go according to plan is sit down and make a new plan. It is easier to grasp a situation when there is a clear plan of action, and it is easier (for me) to follow a plan when it is clearly written out (and posted on my wall).  If you are living on less income, then your monthly expenses should also become less. Re-budget your income and rebalance your expenses.  Keep up to date on your bank account, as well as your spending habits.  Check your actions with your action plan.  Try to make sure they always match.

When recovering from a job loss and piled up bills, we should focus on bringing all of our past due bills up to date. The priority should be to eliminate the accumulated debt. This is because we don’t want to pay 19.99% interest on accumulated debts, when we will only earn 2.0% of interest on our savings accounts.  Only pay as much onto debts as your budget allows. If we spend more than we have, we will always end up in debt. We don’t want to accumulate more debt while trying to pay off previous debts.

Once our income starts to flow again, and the debts are repaid, we should start to rebuild our emergency fund.  Don’t be discouraged if the rainy day account becomes nonexistent or is a lot less than we hoped it would be. That is ok. Remember….the key to rebuilding our nest egg is to make a plan and stick to it. Our savings will start to grow again over time.  Savings are just money and we can’t take it with us.

(Photo By Nina Matthews)

• Maxing out My Nest Egg!
• To Save or Not to Save
• Pay off Debt, Get An Emergency Fund