How Long Can You Last Without Your Job?

Everything that has a beginning has an end, including your current job. We fancy that we will get to retire with a lump sum payment (or golden handshake) of gratuity and pension for life. For some, this may come true but for many, it is a mirage. Your company can be bought over by a competitor that does not do pensions. Your pension nest egg can get wiped out in a market crash. You can get laid off.

Your company can go out of business. A lot of things outside your control can happen to your company. You can wake up tomorrow to the reality that you no longer have a job. Imagine you are without a job tomorrow, how long will you last before going into red? If you are wealthy, the answer is indefinite.

Companies plan for best-case and worst-case scenarios. It is called scenario planning. We need to do the same. There is nothing wrong with having a plan in place, even if we do not eventually get to use it. The company you work for might be the Titanic that even God Himself could not sink, but it may be wise to have a lifeboat just in case it runs into an iceberg.

So how long can you last without a salary?

Few weeks? A month? Few months?

If you cannot last 6 months to a year, you are in a financially precarious position. You are exposed. If you have been working for up to 5 – 10 years and do not have an equivalent of your annual salary saved, it means your rate of wealth accumulation is close to zero. Apart from having a healthy emergency fund, you need to generate multiple streams of income. A good place to start is investing in money market instruments like fixed deposits, commercial papers, treasury bills, bonds, etc. You don’t have to work to earn this type of income. You can also develop paper assets like intellectual property based on your area of talent and passion – e.g. songwriting, movie scripts, books, etc. You can also start a business and employ others to run it after it has stabilized. Opportunities are limitless – limited only by your imagination.

It has everything to do with your mindset. If you close your mind to multiple streams of income, you will see no opportunities except your salary, overtime, per diem, and other perks. Depending on one source of income is an industrial age idea whose time has passed. In the information age, you can lose your job in a twinkling of an eye. You need to upgrade or you will end up with the wrong end of the stick when you get downsized.

If you have not done so already, you need to build up your emergency fund to sustain you in the event of a job loss. You can move it into a fixed-income money market investment where it will grow whether you add more funds or not. Your target should be financial independence – earning enough cash flow from fixed-income investments to cover your monthly expenses. That way, you can do without your job if push comes to shove.