I believe back in the days when the economy was in good order, people encouraged to have savings available as much as 3 months of salary. But what about nowadays? The economy is far worse now than it was 10 years ago and the unemployment rate seems to be increasing every quarter. The last time I checked (actually, it was 5 minutes ago), the average length of unemployment is at about 35 weeks. This is 8 months! So if you lose your job, or quit your job, not working anymore for whatever reasons, you can expect to be in this situation for another 8 months or so. What does this mean? Does it mean that we should have savings mounted up to 8 months of salary? To me that makes a logical sense since you still would have to pay your bills and such to live while being unemployed. But is it practical? Hopefully, you have at least some savings accumulating in your savings account now so you don’t have to resort to a good payday loan site to help you pay the bills.
Every month, according to my budget spreadsheet, I spend an average of $4,200. Give or take a few dollars for unexpected costs and things like that, but the average for the past year has been $4,200 per month. Assuming I break even every month, I would need to have ($4,200 x 8 months = ) $33,600 in total savings available today. I don’t have this kind of money just lying around. To me, this is not feasible right now. Now, if I were to lose my job today, I think I could cut costs and would try to live as frugally as it is possible. I could cut the monthly expenses to about $3,200. That equates to $25,600 of savings needed. Currently, I have $12,000 in all of my online savings accounts combined. This means that I still have a lot of work to do. If I want to get to $25,600, I would have to save $567 every month for the next two years. Since I can’t automatically generate these savings with the snap of my fingers, frugal living or make money by diversifying our income is really the way to go. Sometimes, it can be as simple as participating in paid market research studies and getting paid for eating french fries.