“I’m Paying Off Debt But May Be Laid Off; What Can I Do?”

laid off

When working your way out of debt, life doesn’t simply just stop and wait for you to complete the process. It will still continue on and often throw extra curveballs along the way, almost as if its goal is to take you off track from your goals. One of those curveballs is frequently the threat of being laid off from your job.

Whether it’s an economic downturn, or a company downsizing, or something else, many people working the Baby Steps program face this obstacle. I know this very well because we faced a job layoff while in Baby Step 2.

I’ve Been Laid Off, Too

If you’ve read our story, you know that late in 2017 I lost my job due to a company downsizing. We lost a substantial portion of our income. This almost derailed our plan to get out of debt. We were able to figure things out and managed to complete our debt snowball in a timely manner.

Looking back, we perhaps could have prepared a bit differently. If the 2019 version of me was coaching the 2017 version of me, here is the advice I would have offered.

First, I would ask what the likelihood of a layoff is. Sometimes we can see things coming down the pike. When I was at my job in 2017, I began feeling leery of things in July. I saw that things were slowing down, and began to feel on edge about the future. The 2019 version of me would have asked the 2017 version of me what I thought the chances of a layoff were.

In July, I would have said the chance of being laid off was about 30%. Later in August and September, 40%. By November, I would have estimated that the likelihood was at least 50%, if not slightly higher.

Going Into Storm Mode

I would have told myself in 2017 that with those odds, it’s time to pause the snowball and go into what I call storm mode. When there is a hardship on the horizon, and it seems like it’s going to hit, it is a wise choice to prepare for that.

Many folks along the east coast prepare when hurricanes approach their region. Likewise, we must take appropriate precautions when there is financial trouble heading our way.

In storm mode, you pause the debt snowball and make only minimum payments on everything. Then the extra money that was going towards the smallest debts then goes directly into savings and sits there in anticipation of the storm.

Which Ways Things Can Go

The outcome can end one of two ways: The storm can hit, or it can not hit. You can keep your job, or you can be laid off.

If the storm hits, that money that you built up in storm mode savings takes care of the four walls. That’s your food, utilities, housing, and transportation. Even if some creditors go unpaid for a time, there is no compromising on these basic necessities.

If the storm does not hit, and the danger of a layoff passes over, that cash you threw into the savings account is now free and clear. You can apply this cash balance to your smallest debts first and resume the snowball.

Sometimes, it’s hard to determine if it’s the right choice to enter storm mode or to continue with the snowball. It takes some critical thought and a truthful assessment of the situation to come to a proper conclusion. If you’re not sure, let’s set up a time to sit down and talk about your concerns and what you can do to prepare for a potential storm.

As we have learned throughout 2020 and 2021, life can happen fast. Now is the time to prepare yourself for when things go awry. Schedule your free Discovery Session today to protect your family from life’s happenings.

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