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How Much Money Should You save in case You Suddenly Lose Your Job?

Find out how much you should save in case you lose your job.

A number of Australians live paycheque to paycheque. Almost 30% of us, in fact. And almost 40% won’t have enough savings to maintain their working lifestyle if they lost their income for 3 to 6 months. These are the findings from BT Financial’s Financial Health Index.

Sound familiar? Asking how much you should save in case you lose your job can be like asking how long is a piece of string? Your money will go further if you live a frugal lifestyle when you’re out of work, but for some, just surviving isn’t enough.

Experts have suggested that you may need six months to one year to find work if you’ve lost your job. So naturally, you should have a year’s worth of pay put aside for a rainy, unemployed day. But sometimes you have to spend money to make money. You may need to re-skill between jobs. And this will cost money. Just how much will depend on the industry.

Finding out how much money you should save in case you suddenly lose your job is a trick question to answer. It’s a personal decision. However, most of us would agree that the answer is, ‘as much money as possible’. We’ve listed a couple of tips to prepare your finances if you think you’re going to lose your job.

Financial tips if you think you’re going to lose your job

Here are some handy tips to prepare in case you suddenly lose your job.

  • Budget and cut the fat.

    Budgeting is a hallmark of responsible financial management. If you haven’t already done one, create a budget so you can find out where every dollar is going. This is something everyone should do, not just those who are on the cusp of unemployment. And it’s never too late to start. Once you have your budget, you can trim the fat and save money for a rainy day

    Read about how to budget and have a look at our budget planner.

  • Assess your access to funds.

    There are a couple of options when getting emergency cash. Especially so if you’re a homeowner.

A line of credit home equity loan allows you to access the value in your property without putting it on the market. Home equity lines of credit work like a credit card. You’re able to draw on the equity in your home for whatever reason and you only pay interest on what you’ve taken. This is generally seen as a last resort for people who’ve lost their job as the a home equity loan reduces the portion of your home you actually own.

Get a credit card. Although interest charges will ultimately see you worse off, a credit card can be a great short-term tool for managing your cash flow. Your credit limit is based on the ratio between your income and your expenses. If you apply for a credit card after you lose your job, there’s a chance you may not be approved.

Compare Low Interest Rate Credit Cards

Rates last updated December 14th, 2017
Name Product Purchase rate (p.a.) Balance transfer rate (p.a.) Annual fee Product Description
St.George Vertigo Platinum - Online Offer
12.74% p.a.
0% p.a. for 24 months
$0 p.a. annual fee for the first year ($99 p.a. thereafter)
Platinum card benefits plus 0% p.a. for 24 months on balance transfers (with no BT fee) and $0 annual fee in the first year. Ends 14 January 2018.
Virgin Money Low Rate Credit Card
11.99% p.a.
0% p.a. for 14 months
$49 p.a.
Receive a discounted annual fee, $100 cashback when you meet the spend requirement and up to 14 months interest-free on balance transfers.
Westpac Low Rate Card - Online Only Balance Transfer Offer
13.49% p.a.
0% p.a. for 24 months with 2% balance transfer fee
$59 p.a.
Take advantage of 0% p.a. for 24 months on balance transfers with a 2% balance transfer fee when you apply online by 31 January 2018.
Virgin Australia Velocity Flyer Card - 0% Interest Offer
0% p.a. for 14 months (reverts to 20.74% p.a.)
0% p.a. for 6 months
$129 p.a.
Until 31 January 2018, save with 0% p.a. on purchases for 14 months. Plus, up to 0.66 Velocity Points per $1 spent.
ANZ Low Rate Platinum
11.49% p.a.
$99 p.a.
Get $250 back to your new ANZ Low Rate Platinum when you spend $500 on eligible purchases within the first 60 days from card approval.

Compare up to 4 providers

  • Invest money while you’ve got it.

    Don’t be afraid to invest your money. This is how it will grow. The return on your investment depends on your appetite for risk. The riskier the investment, the greater the returns. Property is seen as a safer investment; while an asset class like shares can give greater returns.

    Learn how to make money by investing your spare cash.

BT Financial 2013 Financial Health Index.

A 2013 survey for Australian spending and saving habits revealed that a number of Australians may not be prepared financially in case they suddenly lose their job.

  • 30% usually live from pay to pay.
  • 39% would not have enough savings to maintain their present lifestyle if they lost their income
    for 3 to 6 months.
  • 17% would not be able to handle a financial emergency that would cost $500 to $1000.
  • 32% worry about being able to meet normal monthly living expenses.
  • 56% can’t save as much as they would like to save.
  • 25% are concerned about the total amount they have to pay off debts each month
  • 21% would have trouble borrowing $2000 cash if they needed it.
  • 31% do not believe they will have a financially secure retirement.
  • 50% are satisfied with their present standard of living.
  • 35% have developed a sound plan that should enable them to achieve their financial goals.

Jacob Joseph

Jacob is a writer and video journalist with finder.com.au. Credit cards, personal loans and savings accounts are his bread and butter, and he likes nothing more helping people understand the sometimes overly complex world of personal finance.

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