Last week Glblguy wrote about a Guideline Budget and Lynnae’s husband lost his job (sorry about that). After I read the two posts, I realized that a good budgeting plan could be a great blueprint for an emergency plan as well. It’s one thing to have 3 months worth of expenses saved as emergency fund, but how many of us actually have a plan to reduce our expenses to make that fund last longer?
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Our Emergency Plan
I thought Lynnae did a great job of outlining what she is planning to do. I would like to go through the same process and outline what I would do if I lose my job using the Guideline Budget as a template:
- Housing — Mortgage payment, property tax, home insurance, and basic utilities like gas, electricity, and water are non-negotiable but we could trim our utilities expenses. However, I could cancel my home telephone and save about $50 per month — and just use our cellular phones instead.
- Food — Stop eating out and buying less expensive food would save us about $400 per month. Of course, non-essential food like beers, sodas, ice cream, snacks, etc. would be gone as well.
- Auto — Stop traveling by car would save us about $260 per month, and canceling our car insurance would save another $220 per month
- Insurance — Aside from the home and car insurance discussed above. I would spend the money to keep our medical insurance active through the COBRA program (1), and my term life insurance would go away with my job (2).
- Debts — Any debt would go into the minimum payment only mode. This means any balance would incur finance charge; however we could call around to see if we can get any 0% no-fee balance transfer deal.
- Entertainment — Stop all entertainments — i.e., no more going to the movies, eating out, hosting parties, traveling, etc. Moreover, I would cancel my cable television and save about $70 per month. The only thing to keep is our Internet connection, so that we could do online job searches.
- Clothing — Stop buying new cloths and stop wearing anything that requires dry cleaning.
- Savings — This would invariable stop while there is no income. Our current savings include a 401k, two Roth IRAs and a 529 plan.
- Medical — This would not change, especially while COBRA is in effect.
- Others — nothing else come to mind right now.
Based on this list, we can trim about $1,000 off our monthly expenses in case of emergency (not including the amount earmarked for savings).
Based on the list above, I think I have to do a bit of homework:
- Find out what COBRA would cost me if I lose my job
- Look for term-life insurance independent from the one offered by my job. May be I can save a few dollars, but the important thing is it doesn’t go away with my job.
Does your family have an emergency plan?
Pinyo is the owner of Moolanomy Personal Finance and a Realtor® licensed in Virginia and Maryland. Over the past 20 years, Pinyo has enjoyed a diverse career as an investor, entrepreneur, business executive, educator, financial literacy author, and Realtor®.