This is a guest post by Ricard Torres, who was once an engineer with a promising career. He realized that the typical 9-5 lifestyle wasn’t making him happy, so he decided to pursue financial independence by building online businesses, spending wisely for happiness, and investing.
Being on the path to financial independence gives you an edge over most people you know. You need to master skills like persistence, patience, money management, and investing—skills that go beyond the average person. One crucial skill that may not be obvious at first but becomes very important is resilience, the ability to bounce back from setbacks.
It’s tough to admit, but everyone faces setbacks, and so will you. Our brains tend to oversimplify patterns and expect a constant upward trend. Unfortunately, that’s not how things work, but that’s okay.
Knowing that things will occasionally go wrong helps you prepare mentally and financially. This article will show you ways to be ready for these challenges so you can navigate through them and come out unscathed.
Losing Your Job – The Worst-Case Scenario
Like many who work 9-5 jobs, I took my paycheck for granted. I had a specialized role in computer design and felt indispensable. Although my job wasn’t always enjoyable, I believed my skills were too valuable to be let go, assuming my job was secure indefinitely.
The pay was good, and I had many plans predicting how much I’d save each month and how my passive income would grow. Those plans showed a nice, steady upward trend towards achieving financial independence.
Then, unexpectedly, I was called into my manager’s office and informed that my services were no longer needed.
The initial reaction to such news is intense anxiety. It’s a crushing feeling of hurt, betrayal, and failure. The worst part is realizing you won’t be getting paid anymore. The panic sets in, filling your mind with frantic questions about how you’ll support yourself and your family and whether your dream of financial independence is shattered.
First Line of Defense – Emergency Fund
Preparation is key in life. Even if your job feels secure, you should always have a backup plan.
The first line of defense that helped me, and I urge you to establish, is a robust emergency fund. This fund can be a lifesaver. It’s the difference between panic and stability, giving you time to set up a new plan.
Here’s how I built mine:
– I lived on minimal money for a month to understand my bare-minimum expenses if things went wrong.
– I calculated the cost of living at this reduced level for one year.
– I spent much less than I earned for several months until I reached that emergency fund target.
Your emergency spending will be significantly lower than your usual expenses. The actual figure might surprise you, but the only way to find out is to test it.
Should I Stay or Should I Go?
If you want to stay in the same field after losing a job, you’ll need an up-to-date CV. It’s much easier to update your CV when you are comfortably employed rather than when you’re desperately seeking a job.
Every six months, take an hour to refresh your CV. Highlight new skills, recent projects, and remove any outdated information.
Alternatively, a lay-off might be an excellent opportunity to re-evaluate your career and life choices. Common wisdom suggests it takes around 10 years to become an expert in something. If you’ve been in your career that long, it might be time for a change to grow and learn new skills.
Building Up the Plan B
To soften the blow of job loss, create alternative income sources. If you have multiple streams of income, losing one isn’t catastrophic.
I started building side businesses months before my lay-off. These small ventures provided extra cash flow and only required about an hour of work after my day job.
One of the best ideas is to start a blog. It’s a platform to express your passions, help others with your expertise, and it can become a good income source if you monetize it. With an established blog and a loyal following, you could focus on it full time and make money while your emergency fund covers your expenses.
It’s a Bumpy Road to Financial Independence
Understand that life is full of ups and downs. Losing your job and seeing your savings rate drop can be very discouraging, but don’t lose hope.
Think of challenges as part of the journey. Tough times are inevitable, but they lead to the good times. Like any stock market graph, there are dips and rises. The same applies to your road to financial independence; it’s never going to be smooth. There will be months where saving is difficult or impossible, and there might even be periods without any income.
Keep your focus on the end goal. By establishing an emergency fund and diversifying your income streams, nothing can stop you from achieving financial independence and living life on your terms.
Thank you for reading!