Could You Survive Financially If You Lost a Job?

financial disasterSome recent posts from Cash Rebel and Reach Financial Independence have really gotten me thinking about how much money we should be keeping in emergency savings and how fast we could go into survival mode if we had a sudden loss of income. Now that we have paid off all of our debt other than mortgages, I’m curious to see if we could get by on passive income alone. After all, isn’t that the ultimate goal of financial independence?

Ultimate Goals

Our ultimate goal would be to make enough passive income, mostly from rentals, to pay our necessary expenses. Anything we earned from salary or other endeavors would go into investments or retirement. While the timeline fluctuates based on the mood of the day, I think it’s reasonable to say we will have our mortgages paid off within the next 10 years. At that point, we can get by on very little. Because I sadistically like to look at worst case scenarios, what if we were suddenly faced with no salary income? Could we make it without resorting to panhandling?

Bare Bones Budget

If my husband and I both lost our jobs tomorrow, we’d have to go into survival mode. Our necessary monthly expenses would include:

Primary Mortgage: $1606 (We could sell our house and move into something smaller, but it would take a while.)

Electric, Propane, Water, Trash removal: $396

Food: $250 (I could cut out most fresh produce and meats, not healthy, but we can’t afford that.)

Car insurance and gas: $150 (I would decrease our limits and drop our umbrella policy. If we’re not working, we wouldn’t drive very much)

Internet: $22.50 (I could go to the library if we really had to cut this out.)

Phone: $50 (We would get a basic, pay as you go plan)

Misc: $100  (I’m sure I forgot something.)

Total: $2652.50

Things We Really Should Have

I guess we could cut out these expenses, but I really think it would be a bad idea, especially with no jobs.

Health Insurance: $350 (Currently, my daugher and I pay $190/month. My husband is covered fully by his work. I’m guessing at the cost to add him to our policy.)

Life Insurance: $77 (We have term life insurance policies.)

Dogs: $100. (It would almost kill me, but I’d have to choose the people in my house over the pets if it came to it. We’d have to turn Mo in to the shelter, and since Ralph is on borrowed time and requires medicines, he’d likely be put down.  It would have to be dire before I’d choose that option.)

Total for Almost Necessities: $527

New Total $3179.50

Passive and Alternative Income

I’m going to assume that I lose my jobs after my business sale goes through because I’m not going to fire myself.

Commercial Rental Net Income: $1662

Residental Rental Net Income: $367

Seller Finance Business Payments: $2500

Online and other: $500

Total: $5029

I’ve honesly never put those numbers down, and it makes me feel pretty good looking at them. We’d have an almost $1850 surplus, even if we had no salary income. Of course, we could also lose tenants, have expensive rental repairs, or the doctor who buys my practice could quit paying me, so it’s not without risk. The business payment will eventually be paid off, so that isn’t an infinite resource.

It would also be pretty sad to live long on our bare bones budget. The thought of ramen, pasta, or hot dogs as  our only meal selections leaves a bit of a bad taste in my mouth. We enjoy travel. We watch TV and rent movies. I go to spinning class. Our daughter does all sorts of activities. I’d hate to live without all that.

What’s the Point?

There really isn’t one other than to make me sleep better at night. I know in the unlikely event that my husband and I both lost our jobs at the same time, we’d be OK until we found something else.

The better point is that if I’d done this exercise three years ago, it would have included at least $1000 a month in credit card payments, $700/month in student loan payments, and $300-$700/month in car payments, depending on who had a new car at which moment. We also would have no residential rental because we would have never saved enough for the down payment. If you run those numbers, it gets a bit more scary.

I don’t like to be one to focus on doom and gloom, but I encourage you to do the exercise yourself. If you don’t like what you see, start making some changes. It won’t happen over night, but I’m living proof that you can change your financial future. A good night’s sleep is priceless.

What would you cut out to make a bare bones budget? Do you have enough saved or in passive investments to overcome a huge income loss?

Image: Freedigitalphotos.net/Dominichi

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Written By
Sydney White is a Texas-born stay at home mom who enjoys spending time with her family, bargain hunting and, of course, writing. She is currently the editor-in-chief of Snipon.com.

54 Comments

    1. Wow, that must have been a very hard decision. I would hate to be in that position, but you have to do what you have to do.

  1. I think I can survive for a year to two tops if I lose my job. This got me thinking that I need to increase my emergency fund for something unexpected that might happen. Still, I would try to look for another one asap.

  2. We reached the point when both my husband and I lost our jobs and we were only depending on my income from my freelance writing jobs. It was very unstable but we made it through. We barely had a savings, which we used to pay our bills and loans, so it went zero in less than three months.

    Presently, we are confident that we can survive if we lose our jobs. We have learned our lesson. We now have an emergency savings account that can cover six to eight months of our expenses, and maybe a few dine out and movies.

    1. I’m so glad we didn’t have to learn the hard way. We were very lucky that we turned it around before something happened.

  3. Based on cash reserves alone, I could survive for a year or two right now depending on how lean I wanted to live. This is assuming I lived in a rental and rented out my condo to pay the mortgage. 🙂

  4. We try to live off of my wife’s income as much as possible since my income is so irregular. It would be tight, but we could life off of her income indefinitely.
    Her job is pretty secure, unless Kroger goes out of business, which I don’t see happening any time soon. She has enough seniority and has such a solid performance record that if layoffs happened, they wouldn’t to her. Hours have been cut recently, but she is still averaging well over the 33 hour per week minimum we have for surviving off her income.

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