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How long could you survive if you lost your job?

Emma-Lou Montgomery

Emma-Lou Montgomery - Fidelity International

Imagine you’re heading to work, just like you always do. The sun’s shining, you’ve got a packed day ahead. It’s business as usual. Or so you think.

Then you get the news. You’ve lost your job.

And suddenly the reality of what’s just happened hits you like a ton of bricks. “We’ve just bought a new car, and we’re off on holiday next month. How am I going to pay the mortgage, household bills, buy food? And it’s Junior’s birthday next week.” The list goes on and the thought of how you’ll cope can feel overwhelming.

There’s no doubt that losing your job is a life-changing event. And figures show that it’s something that too many of us are ill-prepared to cope with. According to one recent poll, 28% of Brits would be unable to meet their living costs for more than a month if they lost their job tomorrow. 

And it seems we’re lagging behind our European counterparts when it comes to saving for the unexpected. Just 58% of UK respondents said they regularly save money to ensure they have funds in the case of an emergency. This compares to 79% of Italians and 63% of French respondents.¹

The fact is that, a decade on from the financial crash, rising inflation, high housing costs and stagnating wages mean many continue to live on a financial knife-edge.

Keep at least three months’ salary in cash

On a £30,000 salary that’s just under £6,000 you really ought to have squirrelled away. But the more you can save, the better, because while it’s estimated to take, on average, three months to get a new job, that’s just the average. And, let’s face it, £6,000 isn’t going to go very far if you’re out of work for six months, or more.

Know how much life costs

When you lose your job what you mustn’t do is live as though nothing’s changed until your money runs out. You have to take immediate steps. And to do that you have to know exactly how much day-to-day living costs.

How much do your rent/mortgage, household bills, phone, car and food shopping cost you in total each month? Now whittle that down to just the essentials. You know, the stuff that you truly cannot afford not to have, such as your home and food. Tot it all up. You’ll probably be surprised how much you spend each month simply existing.

Consider insuring your life

The law can only go so far in protecting people who are made redundant with redundancy pay, but it’ll be of little help to today’s job hoppers.

To qualify you have to have worked for your employer for a minimum of two years. Then how much you’ll get is based on your age. The most you’ll get is one-and-a-half weeks’ pay for each full year you’ve worked for the company.

It’s not going to stretch very far. For anyone used to living on a salary of, say £30k, that’s going to be a long way short of the close to £2,000 you’re used to after tax each month.

If you own a property it’s a good idea to consider taking out insurance that’ll pay the mortgage for you for a short time if you’re out of work. Mortgage protection is usually offered when you take out a home loan. It can be difficult to get later. That’s because those who want it are usually those who think their job could be at risk and this sets off alarm bells with the insurance companies who envisage themselves paying out thousands of pounds in the not too distant future.

When considering mortgage protection, check your eligibility carefully. If you’re self-employed, on a fixed-term contract, or new to your job you may not be able to claim. These clauses are unlikely to be highlighted in red ink, so make sure you take time to read the small print carefully.

Set up some longer-term investments

This is a good idea for everyone. If you want to change career, take a year off or take a break to have a baby, for instance, you’ll appreciate having a little more set aside. You’d be surprised how a small, but regular payment into a fund will pretty much go unnoticed each month. And it will soon add up.

If you don’t fancy higher-risk stock market-based investments, slip a little away into a savings account each month instead, not forgetting your annual ISA allowance. Don’t touch it and it’ll add up nicely over the long run.

Last but not least, stay positive

Losing your job is a life-changing event. No one who’s lost their job will deny it puts considerable strain on you and those who depend on you. You have to work doubly hard - using all your energy to get a new job while still ensuring you have enough to live off while you’re out of work.

All of this can put a considerable strain on your relationships. Supportive as they are, your partner will not appreciate it if you descend into a pit of self-pity and loathing for too long. Yes, grieve. After all you’ve been hard done by. Just get real as soon as you can. And get back to being you.

So come on, are you prepared for the worst? After all, what have you got to lose?

1 Survey data referenced is from a survey of over 6,000 nationally representative respondents in the UK, Italy and France. The survey was carried out at the end of April with survey consultants, Censuswide.

Important Information

The value of investments can go down as well as up, so you may get back less than you invest. Tax treatment depends on individual circumstances and all tax rules may change in the future. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.