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Preparing for an uncertain future

April 29th, 2009 at 09:24 am

NT has a very good job, at a company that until recently has seemed recession-proof. (I don't think any industry is recession-proof now, except fast food, chocolate and movies.)

Then they had a small round of layoffs early in the year, and they've been warning about possible furloughs (mandatory unpaid leave) if they don't reach certain projections. They should know sometime in May just how severe it will be.

Right now it appears likely that each employee will be required to take two weeks' furlough. It isn't clear how this will be applied, but there may be some flexibility about taking it all at once or in dribs and drabs.

Just to be somewhat prepared, even though we can't plan for anything specific, I calculated how it would affect our income and budget if NT had to take one week or two weeks of furlough in a given month.

Since he gets paid twice a month, I multiplied the net pay by 24 and then divided by 52 to determine his weekly net pay: $620. If he is able to space out the furlough and just take one week per month, the budgetary choices seem easy to me: cut out two of our discretionary spending categories, rental car and misc. entertainment, which are $100 each, and cut our saving in half (we currently put $860 per month into short-term savings).

If he is forced to take two weeks in a month, losing $1240, the cuts get a bit more painful; we'd have to cut the two discretionary categories, plus all our saving, and we'd need to cut $180 of our spending money for that month, or $60 per person. We'd feel it, sure, but it wouldn't be the end of the world; we wouldn't have to cut the medical or grocery/household budgets, or stop retirement contributions, or anything very harmful.

So overall, I don't think our lives will change very much if NT's company decides on furloughs. That's assuming nothing bad happens to my job, of course. But until I get direct signs my job is in danger, I'm not going to worry--although I am prepared! I keep our emergency budget up-to-date and know what measures we'd need to take if all three of us became unemployed, and how long we could last that way under various scenarios.

Far from making me despair, these preparations keep me calm and feeling in control in this volatile world.

10 Responses to “Preparing for an uncertain future”

  1. kdmoffett25 Says:

    I need to work on that... I have it somewhat, but until we get rid of all of our credit cards, we need both salaries. Needless to say, once we get them gone, one of us could quit work or lose our job with no issues. The other at that point is to pay off the cars, student loans, and mortgage within 10 years.

  2. ceejay74 Says:

    kd, I am so with you on that! Nearly half our income goes to maintaining our debts (if you count mortgage payments), and of that, over a third of the money goes to maintaining consumer and education debt.

    The only comfort I get from this is that if we pay off all our debt before we retire and remain debt-free, we'll be able to live on 50% of our income (adjusted for inflation)--that makes it easier to save enough for retirement!

  3. KellyB Says:

    CJ, always good to think ahead and prepare what you can. I was laid off in March and am hunting for a job with no real end in sight (just not many jobs out there!) But luckily, we are debt free except our mortgage, and have a very healthy emergency fund. My severence still has about 6 weeks to go, and then unemployment will fill in about half of that. So we have cut extra spending and savings for now until I get a new position. The freedom of only having the mortgage and having the big EFund to rely on has really taken the pressure off - I am not freaking out because things are under control and we can live on just the one salary for now, and for the forseeable future. So build a strong EFund, and then keep paying off those debts, it makes a huge difference to your state of mind in times of crisis!

  4. Joan.of.the.Arch Says:

    ceejay74, I've been reading since you first started blogging and have been impressed at how well you have been tackling the debts, constantly updating plans and looking at consequences. So smart to make those emergency plans. You all have handled things wisely and seemingly with good cheer. Smile

  5. ceejay74 Says:

    KellyB, I'm so happy for you! We're not quite at that point, but it's going to be sweet if we get there. Smile
    Joan...wow, that is such a nice message. My first instinct is to go into self-deprecating mode, but I'll resist. So just...thanks!

  6. NJDebbie Says:

    I'm keeping my fingers crossed so that NT's employer does not furloughs any of its employees! Good luck and great planning on your part.

  7. Apprentice Bliss Hunter Says:

    You're scaring me ceejay !! Your mature intelligent and diligent aura is guide of a guiding light and when I see a rock like you being shook, my first thought was well maybe my job isn't safe either (which in reality it isn't - in the sense that no one knows whats around the corner).

    I'm off on two 2-day vacations over this weekend and I am going to enjoy the hell out of them... 30th b-day Sat.

    I kinda feel like you in that until I sense direct danger to my job, I'm not gonna go into spartan mode. Life is for living. I am healthy....and employed. I have it good.

    I hope to an EF of 6 mths take-home pay by end of 2011.
    Unlike you, I have only myself to look out for - so that makes it easier. My only major luxury is the fact that I live alone in a 2 bed apartment - I'm enjoying the alone time at the moment (most of the time !!)...

    Anyways.. I'm gonna follow your lead and do up a budget based on me losing my job and living on social welfare... you know.. just in case... ek !!
    I guess I can always rent out the second room....

    Best Regards

  8. frugaltexan75 Says:

    How exactly do the furloughs work? Are they unpaid vacation, or do you still go in to work but just don't get paid for your time?

    If they are like unpaid vacation days, could NT find something to do during those times to bring in money? Even if only small amounts, it could help your budget.

  9. merch Says:

    Hope for the best and prepare for the worst.

    Your family has done such a great job so far.

  10. ceejay74 Says:

    Thanks NJ! There's still a chance we will escape it!

    Apprentice, I'll be interested to see your emergency budget should you choose to post it. Believe me, it left me a lot less shaky once I knew what I would do in an absolute financial catastrophe.

    frugaltexan, they are like unpaid vacations. We have discussed the possibility of him re-upping with his temp agency that got him this great job; he always got high marks so they might be willing to find him a two-week or smaller assignment...what would really make him happy is some sort of cat-sitting (or cat-petting or cat-entertaining) gig, but I don't know what the chances are. :P

    Thanks merch! Your calmness and determination definitely has rubbed off on me; I have gotten even more so since watching your successful journey.

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