Yesterday in “Live Like You Lost Your Job” I talked about living below your means now, before you lose your job.
If you were to lose your job today could you sustain your current lifestyle? The goal is to get your lifestyle and living expenses in a state that you could survive if you lost your job and ended up getting a new job making much less than you make now.
It is so much easier to make these hard lifestyle changes now while still employed then when you are unemployed. So let’s begin.
Make sure you have a list of all your expenses. Write them all down, from tithe, mortgage, insurance, car payments, food, utilities, gas, right down to vending machine expenses.
Now make another list of where you can begin to cut back on your lifestyle. This is where the hard part comes in. Keep in mind, many times our lifestyle is more about “want” rather than “need.” Sure you may want a five bedroom home, but do you need one? You may want that 2010 Lexus but it is just a car with a purpose of getting you from point “A” to point “B” reliably, there are a lot of $5,000 cars out there that can get you between those two points exactly the same as a $41,000 car.
Cars are a huge money pit. They lose value the second you drive them off the lot. A little over two years I purchased a 2001 Ford Explorer for $5,600 cash, still have it, it runs great, has ice cold air. It isn’t fancy, but it is paid for, gets me where I need to go, it’s reliable and safe. My point here is a car is a hunk of metal, not an investment or a status symbol. Look at it another way, the average car payment in America right now is between $380 and $460 per month. That is each and every month from anywhere between 36 to 60 months, sometimes more. Even if you buy a used car, say for example my 2001 Ford Explorer, I will NEVER be able to put $380 into it each month in maintenance costs for three to five years….never. I do put money away each month into savings for repairs. So if it needed a $3000 repair, I have already saved that money, and still below the normal monthly cost of the average car payment and won’t have that level repair every year.
Many people are truly house poor. Sure the bank may have approved you for your mortgage, but are you living on the edge right now trying to meet that mortgage payment on top of your other expenses? If it is tight now, what would it be like if you lost your job. Live now like you have lost your job, maybe you could downsize your home?
Are you making payments on TV’s or appliances? Sell them, and buy something smaller and cheaper that is paid for. Sure the front end washers are nice, but they are more expensive than a top load washer….guess what, both get cloths clean. Remember, I am only talking about items that aren’t paid for, items that you may have purchased on credit.
Payments for adult children. Yes, believe it or not, I have many clients who are paying rent, car and insurance payments for their adult children. STOP! If your kids are adults, it is time for them to begin to be responsible for their own bills. After all, if you lose your job, they will have no choice right?
Home equity line of credit….close it. Start paying it off. If you keep it open you are leaving the door open to latterly live off your house. What happens if you lose your job, can’t pay your house payment much less the HELC payment? Yep, the bank takes the house and now you are jobless and homeless….not so good.
Second mortgage and credit cards. Stop charging, stop living on credit and loans. Remember, if you are living on credit, you really can’t afford what you are buying, you are living above your means. The goal here is to live below your means. Live like your lost your job now before you lose your job.
Make your budget based on $20,000 less than you bring home right now…..it will not be easy, it will be a life style change, it will take a year or two maybe more. But in the long run it will be worth it, especially if you lose your job.
If you don’t lose your job, that is great too, because through all this you will be still living below your means, and that extra money, after you have built up 12 months to 18 months in living expenses can go toward paying your house off early.
The ultimate goal is to be debt free, so if you lose your job you can survive on very little. With no bills and the habit of living below your means you can easily survive on as little at $3600/mo maybe a little less, maybe a little more depending on the number in your family. But at least you won’t lost your home, cars, or anything else if you lose your job.
