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FINANCIALLY Speaking Downsized? Laid Off? Will You Be Prepared? T here have been some rather large economic downturns in the past two decades. These recessions have taught many the importance of a sufficient emergency fund to meet the financial demands of a job loss. lf you are one of the lucky ones who did not lose your job in one of those recessions, you might be wondering how large your emer- gency reserve should be. Traditionally financial planners have recommended a fund equal to 3 to 6 months’ expenses, and in the ‘70s and ‘80s this typically would have been enough. But since the ‘80s, a much higher percentage of those who lost their jobs have been out of work for more than 5 months, which calls for a larger reserve of funds. For example, in 2010, following the last great recession, the average duration of unemployment was 8 months. Some important points to consider in determining your emergency fund needs: Make an accurate accounting of your monthly expenses. Start by looking over your bank and credit card statements for the past 12 months, then add the cost of health insurance, if it is currently pro- vided by your employer. Remember that while you are unemployed, you will need to pay for your own health insurance. Once you have that number; subtract expenses that can be con- sidered as unnecessary or optional, like dining out, gym memberships, or entertainment. Jeffrey M. Orth is a Chartered Financial Consultant, a Certified Advisor in Senior Living, and an Investment Advisor Representative, with over 15 years of experience as a business and personal planning, insurance, and wealth management specialist. Jeff is available for group lectures and private consultations. Visit ifitfinancial.com or call 408.842.2716. 44 Assess your employment situation. Do you have a stable employment situation, like that of a government employee or a ten- ured college professor? lf this is the case, you could opt for a smaller financial cushion. In contrast, people in commission sales, entrepre- neurs, consultants and construction workers, should consider a larger reserve fund to help get them through particularly volatile periods. Calculating the amount of your emergency reserve will depend on where you work. lf you and your spouse work for different employers, you can get by with a smaller emergency fund, based on the salary of the higher wage earner, than if your spouse works for the same employer that you do. In the latter case, you have an increased chance that both jobs could be lost at the same time, if your employer decides to downsize. Consider income level, job specialization and any other job - limiting factors, as these can lengthen unemployment. lf you or your spouse have a specialized skill set, it may take longer for either of you to find work at your previous income. Are there other factors that should be considered? Do you have a job that is inherently unstable? Do you have a number of dependents? Are you a single parent? Are you able to rebuild your emergency fund quickly, or will it take some time? Any or all of these situations would make it essential to place more money in reserves. The emergency fund should also include money for a one-time emergency expense, such as a costly home or auto repair. Water heaters start leaking and car crashes happen, even when you are unemployed. Having thoughtfully considered how much emergency reserve you need for your situation, now it’s time to take the next step. Start building your financial cushion so that you will be better prepared for the unexpected. Life may throw you a curveball from time to time. lt is important to plan your life with life’s uncertainties in mind. Registered Representative of, and Securities and Investment Advisory Services offered through Hornor, Townsend & Kent, Inc. (HTK). Registered Investment Advisor. Member FINRA/SIPC, 16845 Von Karman Ave, Ste. 225 Irvine, CA 92606 (949)754-1700. IFIT is independent of HTK. CA Lic #0C49291 GILROY • MORGAN HILL • SAN MARTIN SEPTEMBER/OCTOBER 2016 gmhtoday.com