When I was a teenager, my dad had a great job and was making a very good income. We were not rich, but we didn’t have to worry too much about money. In fact, my dad never worried much about money his whole life… he still doesn’t ;-). Way back when, he lost his lucrative contract just before the Holidays (Merry Christmas!). While he was making a lot of money, he also spent most of it. Easy come, easy go they say. Then, when he lost his contract, he didn’t have much to live on. He didn’t know what to do either. Therefore, he went bankrupt only a couple of months after this sad event. We lost our house, our cars… and I lost my summer job too since I worked for him! My dad is a smart man, but at that time, he didn’t have a plan B. And he paid dearly for this oversight.
What is a plan B?
Since we just hit another recession, most people saw a family member, a friend, a neighbour, a spouse that had lost a job. It got people thinking about what they would do if it ever happened to them. When I talk about a plan B, I am not talking about an emergency fund. Money won’t solve all problems if you don’t have a job, it will only buy time. This is exactly what happened to my father; he had some money put aside, enough to cover 3 months of income. But during that period, he couldn’t find another job and had to bring back the keys to our home.
A “plan B” is way bigger than having an emergency fund. It covers topics such as:
– Money –
Obviously, the first thing is to answer the following question: “where do I get money from if it’s not from a pay cheque”. Before you do anything, you must know where to get at least a few weeks of income in order to activate your plan B. It can be from an emergency fund (invested in a savings account or money market fund), from a line of credit or withdraw from a registered investment (this would trigger tax implications while affecting your retirement plan).
– Spending –
If times are rough, you must be able to identify what to cut out of your discretionary expenses in your budget. We all have our little “sins” that siphon money from our bank account on a regular basis. I personally spend a lot on food and restaurants. I just love it! However, it is important to know where you can cut back so you can act immediately and become “more frugal”. While cutting on restaurants, clothing or your favourite morning latte, consider also cutting down on other expenses. You might be able to decrease your mortgage payment (if you have a line of credit, only interest payments are required) or save on other spending (daycare, gas, it may be a good time to look at your insurance premiums 😉 ).
– Making Money –
Having a few bucks set aside is good. Spending less is better. But the real problem that must be solved by your plan B is how to make money again! And applying for 30 jobs a week is not what I call a plan B. It would not be sufficient in a recession, especially if your field of expertise has being seriously affected (these days talk to anybody working in the automobile industry…).
In order to start making money rapidly, there are a few things you can do on a steady basis:
– Continuing education. This is one of the main reasons why I did an MBA. It wasn’t to get a promotion but to improve my employability. This piece of paper can open several doors in different fields. It may not lead to my dream job, but when you don’t have one, any job is a dream job ;-). A degree can also improve your employability with your current employer as well. Key people are rarely laid off in the first wave.
– Maintaining a great network. The more people who know you, the more chances you have to find another good job quickly. Most choice positions are being filled by word-of-mouth. You just have to make sure that you are part of those conversations ;-). Sites like Facebook and Linkedin are definitely useful and you should remain somewhat active to ensure you remain connected.
– Having a sideline. No matter what you are good at, you should use your talent, your passion to generate a small income on the side. It is this income that may become your primary source of money during tough times. Thanks to the internet, most people are able to have an online store and generate a few bucks from home these days.
While thinking about your plan B, you will probably optimize your personal finance and might find a few bucks to save here and there. In the end, your Plan B on making money might even become your plan A over time!
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