I was fired from a job once.
Technically, I was “let go.”
On paper, that’s better, because it wasn’t my fault. In practice, it’s largely the same.
“We’re not going to pay you to work here anymore. Good luck!”
It happens to the best of us, the worst of us, and everyone in between. It’s largely out of your control. But you know what you can control?
How prepared you are when it happens.
That’s where emergency funds come in. They’re one piece of the protect-yourself diversification strategy, right there with building multiple streams of income, and you really need one.
Yes, you.
Here’s four reasons why – all related to how just one simple emergency fund will turn getting let go from “oh my god awful” to “maybe this isn’t the end of the world.”
#1. You Can Make The Really Inappropriate Joke
There’s one aspect of getting let go that I’ll always remember.
It was a group layoff, so there were four of us in the room at the time. Because I lived like a pauper student during my time at that job, I had a decently-sized emergency fund saved up. Even if I wasn’t managing it properly, it was there.
So after confirming with the HR rep that this decision was financial, and not because we were all awful employees, I turned to the rest of my just-fired friends and said,
“So… Who wants to go to the bar?”
It was 10AM.
That’s the thing about emergency funds. Even though I knew I wasn’t going to be getting paid as usual, I had enough money in the bank that my needs would be covered for at least a few months. That takes almost all of the panic out of getting fired, because you know you’ve given yourself the luxury of time.
And the luxury to make the bad joke.
You know what people need more of when they’re getting fired? Bad jokes from people who aren’t firing them. Have an emergency fund so you too can joke about day drinking after getting fired.
#2. You Can Day Drink After Getting Fired
Oh, and then we all went to the bar and had a few pints.
Does it count as a joke if you meant it and then followed through, because you weren’t worried about how you were going to pay your rent?
I’m going to count it as a joke.
Next!
#3. You Can See The Experience as An Opportunity
If you’ve been reading my weekly updates, you saw this week that Vic from Dad is Cheap wrote a post about a recent layoff at his job. A lot of people would have reacted negatively, and that’s understandable – normal even!
But Vic looked at it differently. He saw the extra time as a gift, an opportunity to spend more time with his daughter at her young age.
Is he looking for other opportunities? Sure.
Is he panicked about how he’s going to pay for things? Not even kind of.
That’s the power of planning your finances, and having an emergency fund waiting in the wings.
#4. You Can Evaluate Your Options
Listen, if you don’t have an emergency fund, the first job offer that comes your way is going to look pretty great.
“So what you’re saying is, instead of having no money, I can have money? TELL ME MORE ABOUT THAT.”
But what if this layoff was a blessing in disguise? What if it was an opportunity to regroup, look at what you’ve accomplished, and target the next step in your career?
Full disclosure, I did not do this when I was laid off.
I was still new in my career, and I didn’t fully understand How To Professional yet. However, I had a friend who used the time to take a step back, and it was the best thing he could have done for his career.
He went from a string of marketing agency jobs, to a killer marketing manager job at a growing company, and parlayed that into even bigger jobs afterwards. All because he didn’t take the very first job he was offered, and gave himself the flexibility to wait for the right opportunity.
You know what gives you that time and flexibility?
Emergency funds.
You should get one.
Since I seem to be on a bit of an emergency fund theme here this week, what with my emergency-fund-funded lesson in How To Adult on Tuesday, I’ll be writing about calculating how much I actually need in my emergency fund next Tuesday. If you have any interesting tips on how to go about it – I’d love to hear them!
Paying yourself first and being able to buy some time in a sense. It’s beautiful, no? I wonder if you had a sense of how many coworkers had similar cushions. I’d imagine not very many. Kudos to you for being so sensible and strategic right out of the gate. Sounds like had more of a handle on How To Professional than many people.
Oh Penny, you’re the best! Thank you. I think one of the group I got let go with had an emergency fund (or at least, his girlfriend made enough that he could take some time to figure things out) but I know one of them was seriously worried. She found something quickly and it’s a great fit for her – she’s still there! – but it was really sad to see how brutally stressed she was. I think she also stayed at that job way longer than she was happy to, probably for exactly that reason.
So many things in life are about how you react to the events around you. Having the comfort of an emergency fund lets you make smarter decisions, like your friend who took a negative and turned it into a positive.
Getting fired sucks, just like being rejected sucks, but sometimes it’s the kick in the butt we need to remix things.
Exactly! I’m able to laugh about it now since it was a few years ago, but it’s never fun. I like how you phrased it as a kick in the butt too – not necessarily anyone’s favourite thing, but sometimes necessary!
Thanks again for the shout out!
Yes, Yes, Yes to emergency funds! Because of our emergency fund and our frugal nature, my family is comfortable with me being out of work for a few months. I wouldn’t mind if a great opportunity happened next week though 🙂
I am thoroughly enjoying this time off. There is nothing like spending time with your daughter in the middle of the day when everyone else is working. It made me realize how much I didn’t like my previous role. If I didn’t get laid off I might have been there another year or two (or more) because the money was pretty good. I know people always say money isn’t everything – but it wasn’t until I was laid off that i really understood that phrase. I know my next job will be something that will further progress my life and career.
That’s the best Vic – I keep sending shout outs because I’m seriously just SO impressed at how amazingly well it’s going. I feel like your wife should totally do a guest post or an interview with you to explain how much less stressful it is for EVERYONE involved, not just you – because that’s something I’ve never had to worry about (partners / dependants) but it’s a huge benefit of having an emergency fund! It’s not just for you, it’s for them as well.
Oh god yes to all of this. You never know what’s coming, and that’s even more true in my cities current economy. The oil bust has taken a serious toll on a lot of my friends and family. But the ones that are aware of a possible layoff or career change have all been preparing for the possible closure.
One other thing I think people often rely too much on is the severance package. Those packages aren’t going to help you last if you’re not even sure how to live within your means. Sudden expenses need extra support which is another reason why emergency funds are so important.
Great post, Des!
Thanks Alyssa! I can’t imagine what it must be like to be in Calgary right now – I know you and Bridget have both talked about it, but seriously, my thoughts are with the people in both of your circles who are impacted by it! And you guys, because it can’t be the most relaxing thing ever, having such a prominent industry experiencing that kind of turbulence.
Also, um, YES to the reliance on severance not being a good idea! I got three weeks’ severance pay when I was laid off, which was considered generous. Even being really frugal, you could probably stretch that to cover two months if you absolutely had to, but you’re right – if you’re not used to watching your spending, it’s going to come as a REAL shock.
“We’re not going to pay you to work here anymore,” hahaha. Yeah, that about sums it up. Man, yeah, emergency funds are key. I kind of think that I should make mine bigger than it is — I could live for about 2.5 months on what I have saved, but that’s actually not that much time. I wonder what the rule of thumb is: six months?
As much as this experience must have been really tough at the time, it sounds like you learned a lot from it. Having an emergency fund probably means something slightly different depending on whether one’s idea of an “emergency” is purely hypothetical or is something that has actually happened to one in the past.
I’m right there with you on the 2.5 months thing, don’t worry! I’m trying to save for so many things all at once – this, the dog’s emergency fund, a house down payment, retirement, vacations AND big home purchases – that I have to admit, I’m not tackling the emergency fund quite as fast as I could be. It’s definitely getting a solid chunk of money every month, but I’m taking the slow and steady approach to funding it, so that it gets there over time.
As for the rule, I think it’s between 3 to 6 months, depending on a bunch of factors – I’ll do more research and break it down next week! My greatest hope is that none of my research outright contradicts my slow and steady approach, but… we’ll see. Maybe I’ll have to try some kind of reverse-snowball approach to saving.
I LOVE your thinking!! If I got fired, the first place I would want to go is the bar, no matter what time of day it is. The first goal for all of my clients is to have a healthy emergency fund. Financial surprises happen all the time so we should never be surprised that they happen, just what type of surprise it is, and the only way to truly withstand the surprise and maintain your mental health and sense of humor is to have a healthy emergency fund.
Hahahaha oh my gosh Shannon thank you so much – after posting this, my only thought was “Oh man, NO ONE is going to appreciate the bar thing, that is totally just me.” I think that’s such smart advice for your clients too – it’s truly been my secret weapon through times of fairly low income as I got started in my career. I’m positive that it was a big part of staying out debt during those early career years too (which actually, would be a good post – thank you for the idea!)
Also, I have to say, I absolutely love your blog – I’m so flattered you commented! Hope you have an awesome weekend ahead of you!
Yes, yes & yes! So much value in the emergency fund when things like a lay off may occur. Give yourself that freedom, flexibility & peace of mind. Having that safety net of funds will allow you to truly see all options in front of you and pick the next best thing for you (and not just let a new job opportunity that may not be the best for you dictate your options). My goal is to build up an emergency fund for one year worth of expenses! So far I’m at about 5 months, so almost halfway there. I also view this emergency fund as an opportunity fund too, where if I need to make a sudden decision (that may require additional expenses like moving suddenly, etc), then I can utilize these funds for an opportunity.
Oh my gosh I LOVE the “opportunity fund” phrasing! That is so optimistic and wonderful, and it’s really appropriate because that’s a little bit of how I see it as well. Yes, it’s earmarked for emergencies, but if the cost of not pursuing an opportunity might be huge, spending the money (and avoiding debt!) could be just as valuable. I’m also probably a tiiiiiny bit more lax than a lot of the personal-finance world suggests with my definition of emergency – like my $458 ticket that came out of nowhere, haha. After throwing some freelance income in to top it off, I’m only out about $40 for the “emergency”, but still.
Congrats on the big 1-year goal, that is amazing! I’m aiming for a full six months, but I’m only around 2 right now. Slow and steady!
I LOVE that you had the presence of mind to make a joke in that moment! I’m sure I would have been more inclined toward tears or anger!
I remember the peace of mind that came from building up our fully funded emergency fund, knowing that we could now weather a layoff or some sort of major life happening without panicking or maxing out our credit cards. What I’ve learned since then is that saving an emergency fund is sort of like a preamble to saving for financial independence. Once we reached a point where we knew we’d be *completely fine* for, like, years, if we lost our jobs, we got that same feeling we had when we first maxed our emergency fund, except times 10 or 100. It’s pretty much the best feeling ever, though when we reach the point when we can confidently quit for good in a couple years, I’m sure that will be the same feeling times another 10. We’ll let you know. 🙂
Oh my gosh I feel like that would totally be the reasonable next step too, because I completely understand this logic! Sigh. I’m going to go all public with the “I have a personal finance blog!” thing and then in three years decide I want to retire early once I’ve hit my other goals, aren’t I?
Also, I seriously cannot wait for your early retirement. Is that weird? I’m just so excited for you guys, and it’s only like 5% about getting to see pictures of your dogs. You do such a great job of articulating it, and I can’t wait to e-celebrate with you! (To be honest I’ll probably pester you for an address to send a card too, because it is a Big Deal!)