One big way to get intense about financial independence
Posted
Jul 02 2008, 10:57 PM
by
Karen Datko
Rating:
This post comes from Trent Hamm at partner blog The Simple Dollar.
You are going to be fired from your job this Friday.
Read that statement again. Close your eyes for a moment and imagine if that sentence were true in your own life. Would you be ready?
Most people would panic if they came to work and found a pink slip, simply because they're not in a financial place to handle that situation. They'd furiously apply for unemployment benefits, start chugging the Pepto-Bismol, and hurl their resume out there to 100 new places, hoping -- praying -- for a new job to come along quickly.
How could one be prepared for such a blow? In an uncertain economy, it could happen at any time, no matter how safe you think your job is. Do you remember the "safety" of the Enron folks in 2002-2003, for instance?
Right now, start acting as if the above statement is true at all times. Believe constantly that you're just a few days from being fired and then try a few of these new behaviors on for size.
Stop spending foolishly. This is the biggest step. If you're spending money in needless ways, curb that severely until you're in a state of financial independence. If the thought of getting fired makes your stomach tighten, you're not there yet.
Start building a solid emergency fund. Count every dependent you have. For each one of them, you should have at least two months of living expenses in a high-yield savings account. I'd recommend three months per dependent. That way, if everything falls apart, your family is protected.
Build a real budget. This doesn't mean pulling numbers out of the air and assigning them to arbitrary categories. This means counting up every dime you spend for a month, sitting down with all of it, figuring out where you can cut the fat, and setting some goals for the next month. Do that over and over again and you'll start feeling in control of your spending.
Pay off all of your high-interest debt. Sit down with all of your debts and construct a debt-repayment plan. Given that this is urgent, I recommend starting with the debt with the smallest balance -- just to get rid of that monthly payment -- and keep working from there.
Minimize your required monthly bills. Also look at all of the bills you pay in a given month. Could any of them be trimmed back a little or even eliminated? Look especially at any entertainment bills and any memberships you pay for. Do you use those enough to justify the cost? Remember, every dollar of fat you trim here will roll straight into getting rid of those debts much faster.
Start firming up your social network. Invest some time touching base with the people you know. See what they're up to these days. You shouldn't actually look for job opportunities, but instead look for opportunities to help out your social network. If your network is strong, when the moment comes and you do get that pink slip, you'll have a lot of strings to pull to help you get back on your feet.
Keep your resume polished. The best time to get your resume in great shape is right now, when you don't have the stress of needing to cram something together. Polish it up and get it looking good.
Spend your spare time developing skills or laying the groundwork for a side business. Don't spend your spare time watching "American Idol." Spend it improving yourself and making sure you're in a more secure position with multiple streams of income.
This is a waste of time because I'm not going to be fired! There are two immediate responses to this complaint. First, when that pink slip shows up on your desk, your complaint will seem really foolish. Second, even if that pink slip never does show up, executing these steps over a period of time will create a situation where you can walk away from your job whenever you want to -- the feeling of true financial freedom.
So take that phrase and put it all over your environment so you'll see it time and time again. It will remind you throughout the day to keep your eye on the ball and put yourself in a position where it doesn't matter anymore.
Here it is, one more time:
You are going to be fired from your job this Friday.
Other articles of interest at The Simple Dollar:
Financial Independence Week: Handling independence for the first time
Financial Independence Week: When and how to cut direct financial ties
Financial Independence Week: Should I expect my parents to rescue me?
