Nothing that would make the National Enquirer but it should.
Because it’s loss could be brutal. Your job.
Reading Don Peck’s article in the March issue of The Atlantic, “HOW A NEW JOBLESS ERA WILL TRANSFORM AMERICA”, left me feeling deflated, ‘empty as a pocket’ in Paul Simon’s words.
In the first instance, it triggered my fight response. What to do (and do it now) to protect my friends and my children from the potential downward financial, emotional, and social spiral that joblessness could create if Peck’s and others’ predictions are even close to accurate.
Signs of Trouble That Peck Reports
* average duration of unemployment now extends beyond 6 months (first since 1948);
* in the past year a job loss, a reduction in hours, or a pay cut hit 44% of families;
* number of delinquent mortgages in November at 1 in 7, up from 1 in 10 a year earlier;
* no other circumstance produces a larger decline in mental health and well-being than being involuntarily out of work for 6 months or more;
* we are 11 years into a period of decline, much deeper than the latest recession.
Sobering thoughts for Americans to be sure, all of which led me to change my stance on the amount of emergency funds you should have available. This relationship between consumption and saving is a precarious balance and should reflect changing circumstances, both yours and that of the economy.
Given that so many of us use multiple credit cards with ridiculously generous limits, I had relaxed the traditional rule of thumb about keeping 6 months of income available in highly liquid assets. In the past I felt comfortable that 3 months would be adequate. Not any more thanks to The Atlantic article.
The challenge, however, when budgets are tight is to squeeze that much out of monthly expenses. This represents a significant amount of cash that few can manage to hold back from consumption when every dime is allocated for something.
Reading this article will help you find the motivation to try if not the immediate cash.
Copyright 2010 William M. MacKay
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