Guide to Preparing for and Surviving Financial and Career Emergencies: Because Bad Things Do Happen to Good People

Recently a good friend of mine was wrongfully terminated from her employer. This sad turn of events weighed heavily on myself and anyone else with enough of a brain to recognize the farcical accusations that got her thrown out. But it weighed most heavily on her as both her financial health and professional goals got blown away. As I watched this ordeal unfold I was forced to think about my own situation and what would I do if such a thing happened to me.

Before I proceed I would like to dedicate this article to that friend of mine, one of the hardest working and brightest people I ever met. May she get back on her feet and arise from her recent tribulations like a majestic phoenix.

Bad things can and do happen to good people.
It's an unfortunate fact of life that no matter how hard you work, how smart, kind or helpful or invaluable to the company you are you can still have your job pulled out from under with for no reason. Sometimes employers downsize or go out of business and sometimes your coworkers conspire to get you removed. It's even more unfortunate that many times you also have no recourse. You can get a lawyer, but you may not necessarily have a winnable case. The sooner you accept the unlikely fact that you could be next, the sooner you can start preparing for it, so that if disaster strikes, you can emerge relatively unscathed.

Start an emergency fund.
An emergency fund is a financial cushion; there to buffer you when dark clouds descend over you. Starting one is relatively easy, just start saving money in a separate account. How much should you save? Most financial gurus say that you should save an equivalent to 3-6 months of living expenses. Never touch that account for anything except true emergencies. If you can pay for it without touching that account (or raiding your retirement savings), it's not a true emergency.

Find ways to bring in alternative income.
Almost everyone has a day job that provides him or her with a regular salary. What other sources of income do you have? Alternative income can be anything from dividend yielding investments to a part time job waiting tables or even a small business you run on the side. The importance of alternative income sources is that they provide an extra buffer should you ever lose your primary job. How much money should alternative income be providing? There really isn't a right answer, and a case can be made for anything ranging from as much as you feel comfortable with to as much as possible.

Identify expendable luxuries.
Everyone has things that they indulge in but don't really need. These are luxuries. Perhaps its monthly payments on that Lexus, your need to assemble the world's largest DVD library, daily trips to Starbucks, cable TV or a professional dog walker. When hard times hit you should be prepared to rapidly cut back on these. Once you're back on your feet you can resume your indulgences.

Always have a backup plan.
This is a critical mental exercise that will increase your preparedness should disaster strike. Many people become paralyzed in the face of misfortune; standing around like a deer caught in headlights. This can be lessened or even outright avoided if you have a backup plan. Consider what would happen if you lost your job today. What would you do? Where would you go? How could you get by? What other jobs could you do? Would you have to move? If so, to where? Do you have friends or relatives that could help you out? What if they couldn't? Do you have any skills that would make you employable outside your field? Any contacts that can help you get a new job fast? Did you build up that emergency fund? Any alternative income sources available? A good backup plan has answers at the ready to questions like these.

Have an résumé or CV at the ready.
Since you never know when your job may fall out from under you, it's best to be prepared to reenter the job market on a moment's notice. Keep your résumé up to date. Also, keep a list of recruiters, headhunters and other contacts as well. You never know when you might need them.

Build a support network.
A true support network consists of close family and trusted friends. People you have known for a long time and can be counted on to support you when you're in dire straights. When tapping this network, don't be a mooch; always return the kindness given to you.