What Would Happen if your Income Stopped Tomorrow?

What would happen if your company laid you off tomorrow?  What if you work for the Government and the debt ceiling were not raised, forcing a sudden 40% cut, including your job?  Maybe you work for the FAA and the current controversy over the FAA reauthorization bill has caused you to be furloughed for the last two weeks.  What has happened?

When the credit cards come in the mail, will you have the cash to cover them?  What about your utility bills?  Your home mortgage?  Gas for the car?  College tuition bills?

Most people live from paycheck to paycheck.  They may be living the life of the affluent – going out to dinner at nice restaurants, buying all the stuff in SkyMall, going on lavish vacations to Disney World and Aspen – but if they were laid off for even a few weeks, their ability to pay their bills would suffer greatly.  Many might need to take the drastic step of cashing out 401K or IRA assets since that is the only store of money they have.  Maybe they have already done this during another “emergency” like a dead car or dead air conditioner.  Despite having tens of thousands of dollars flow through their hands each year, most people are broke.  Does this sound like you?

Let’s say instead you invested a little from each paycheck.  Maybe you were able to save $2500 or $5000 each year, outside of your 401K deposits.  You put aside $200-$500 per paycheck.  This was a sacrifice.  Maybe instead of getting the new car with the new car smell and the new car payments, you bought a $2000 Toyota Corolla with 150,000 miles and drove it for a few years.  After a few years you were able to save up enough, sell the Corolla for $1500 and combine it with another $2500 from your investments to buy a nicer 6-year old car with only 60,000 miles.

If you had been saving for 20 years, you might actually be making enough from your investments to offset your income entirely.  When you were furloughed, you cursed Congress for not working things out, but you had $10,000 or $20,000 in savings to draw upon.  You were able to pay the mortgage, the light bill, the gas bill.  What could have been a crisis was an inconvenience.  Instead of trying to find a new job at 40 after a layoff, maybe you decide to just go into business for yourself.  Maybe you decide to go back to college and start an entirely new career.  Because of your investing, you have these choices.

The sacrifice and investing in the quest for financial independence isn’t just for the greedy.  It is for everyone who wishes to reduce the worry in life.  It is for everyone who is responsible.  Everyone who never wants to risk being evicted due to a layoff or injury.  Hopefully the followers of this blog know and realize this.  Hopefully anyone new to the blog will think about this and maybe look at changing their financial picture.  There is nothing like not needing to worry about losing an income.

Your investing questions are wanted.  Please send to vtsioriginal@yahoo.comor leave in a comment.

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Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

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