Ray’s Take The old rule of thumb for an emergency savings account was three to six months of living expenses. It was created at a time when the workforce experience was more monolithic and predictable. This was when there more likely was a single breadwinner who worked at the same company their entire life and retired with a gold watch and a big send-off party.
Those days are behind us now. Changes in the workforce and economy have led to a much more fluid society. Years ago, changing jobs multiple times was considered “job hopping,” and it was a big red flag on an employment application. Nowadays, it’s the norm. So when creating an emergency fund, the new rules should include time and resources for career changes.
Bear markets come and go. Real financial distress tends to occur when people didn’t properly prepare for reasonably predictable financial challenges. The time to fix the roof is when the sun is shining! Build those reserves while you have cash flow coming in. Give yourself the freedom of finding the career that’s best for you by creating a fund large enough to support yourself and your family for a longer period of time – whether that timeframe is by choice or thrust upon you.
You need to have a money plan in place before making a career change, not just a career plan. You need a financial plan to protect you from the downside risks you take on in making such a dramatic life transition. And a bigger emergency fund is a vital part of that plan.
The era of lifetime employment is over for more and more, and we need to plan for multiple careers throughout our working lives. An expanded emergency fund will allow us to make better long-term decisions without worrying about losing the house or eating, but it’s hard not to tap into those resources when tempted!
Dana’s Take Employment gaps and transitions do require a greater savings cushion. To minimize those gaps and get ahead of the competition, Gov. Bill Haslam is offering free tuition and fees at Tennessee Colleges of Applied Technology (TCATs). His Drive to 55 and Reconnect programs (tnreconnect.gov) aim to retrain adults for higher-tech – and higher-paying – jobs.
Before turning up your nose at technical or vocational training, look into the salaries for some of these skilled tracks. A surgical technician, the person who hands the surgeon sterilized tools, requires three semesters of training at community college and salaries start at $40,000 to $45,000 plus full benefits. Try matching that with a history degree.
Peruse the fields of study offered at TCATs to find specialties tailored to current job openings. I know it’s hard to teach an old dog new tricks, but gaining cutting-edge skills may make you feel like a much younger dog.