Sometimes life can get a little messy and things don’t always go according to plan. The best thing you can do to prepare yourself is expect the unexpected since you never know what curveballs might get thrown your way.
You may love your job and have no plans to retire anytime soon. Here’s the thing: Leaving your job might night not always be your choice. Your employer might decide for you, your health could dictate otherwise, or you might have a spouse or family member that requires your assistance.
If you ask Pattie Lovett-Reid, having a financial Plan B is crucial.
What is a Plan B?
A Plan B allows you to respond to a difficult situation more effectively, so you have to ask yourself what that means to you. Is it a reserve fund? A second job? A hobby?
You need to figure out what is right for you. You may not have the answer right away but sometimes just asking the question is enough to get the ball rolling. Ask yourself if something dramatic would happen in your life right now -you lost your job, you lose someone you care about, you lost your net worth due to fraud—what would you do?
Thinking about what you might decide to do next can come down to two things, planning and your age. Yes, age. When it comes to age we actually have three numbers that matter.
- Our chronological age (i.e. our actual age)
- Our biological age, which may be aligned to our chronological age depending how good or bad our health is
- Our financial age (i.e. how much money we have saved relative to our chronological age)
With financial age, the older the better and that can only happen if you have saved some money to bridge an emergency situation. Both can happen and having your financial foundation in place allows you to get through a difficult situation that much easier.
Why does this matter? The road to good health both physically and financially is tough work. There are no quick fixes and discipline is key to both. You may find yourself exploring career alternatives later in life. If you’re forced to embark on Plan B and you want to be in the driver’s seat, ask yourself these questions:
- Do you have enough money to embark on a new adventure?
- Do you actually budget?
- Do you have an emergency fund in place to bridge employment gaps.
If your financial health is younger than your actual age it might be time to grow up. Living day to day can be fun and you may love your job but life isn’t static – it is dynamic. We all need to have a Plan B just in case Plan A doesn’t go according to plan.
If your financial age is younger than your actual age…
- Explore ways to increase your salary base. Increase your education to increase your earning potential
- Look for ways to cut costs. For example, exchange programs that trade off services for time spent.
- Exploit the secondhand economy (i.e. buy/sell/trade services)
- Look at your balance sheet and search for ways to cut discretionary costs (i.e. anything that doesn’t have a contract associated with it)
- Save more, spend less and examine every line on your balance sheet to do it. Explore cheaper housing, look for ways to cut taxes, stop mindless spending.
Make your hobby into a business
Many people, especially millennials, are embracing a hobby or passion and turning it into a business. Others are not interested in conventional hours of 9 to 5 looking for flexibility. The most secure type of employment is the self employed. If you have a plan and you hustle you can build the business. You should try to have an entrepreneurial mindset even in a corporate environment.
Watch the video clip above for more of Pattie’s tips!