6 Ways to Save for an Unexpected Job Loss
Larry Buhl | Monster
Cut Back on Your 401k — Temporarily
Normally, you should sock away the maximum in your retirement plan, especially if your employer is matching it. But if you’re falling short each month and making up the difference with a credit card, cut back on the contributions until your finances are back in shape. “You must pinkie-swear you will start contributing the maximum as soon as your financial rough patch is over,” Yochim says.
Don’t Spend Found Money
If you had a lucky streak at a casino or received an inheritance, save it, preferably in a high-yield savings account. Even if a layoff is not looming, think hard about automatically boosting your lifestyle if you received a raise or promotion.
Don’t Give Uncle Sam a Free Loan
“Ideally you want to owe nothing and get nothing back on April 15,” Yochim says. “If your tax [refund] was more than $2,000 last year, you’re withholding too much, so you should adjust your withholdings to keep more of it now.” Check out the withholding calculator on IRS.gov, and then ask HR for a W-4 form if you think you’re paying the government too much, too early.
Don’t Mingle the Emergency Fund with Everyday Cash
If you put your rainy day fund in a separate bank, you’re not so likely to dip into it, according to Yochim. If you have direct deposit, your company may even be able to put part of your paycheck in a separate account.
Having enough money in an emergency fund can make the difference between discomfort and outright panic if you’re laid off. However, some of these tips — particularly the no-plastic rule — can be effective ways to save even if you never see a pink slip, Yochim says.
“Everyone should have an emergency fund,” she says. “And remember that a line of credit should never be considered an emergency fund.”
This article was originally published on Monster.com.