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