While running the numbers for my post on Tuesday, I managed to really terrify myself in regards to my current financial picture.  It’s much better than it was four months ago, but still… sheesh.  My specific money diet is going to be a more extreme version of No Buy Month and probably won’t be this intense for much past the new year… but it’s necessary right now.

Starting now, I will commit to the following rules:

• Pay my needs first.  Rent, bills, laundry, car ins, gas to get to work and an oil change that is due. (Plus dog food if he needs it.)
• I do not NEED anything else except food.  And I will only buy food from the grocery store.
• Aside from the above, if I have to pay for it, I can’t have it.  For entertainment I have plenty of great books (and a library nearby), access to Netflix, a camera, a computer and an Xbox 360, plus plenty of free events around the city.  I will be fine.
• All non-recurring payments will be cash.  I’ve already started my stockpile with tips, reimbursements and gifts from my parents.
• Use what I have.  Added bonus of reducing my personal consumption.
• Sell what I don’t use anymore.  Money in the bank!

I’ll be honest, it’s a little daunting and scary, but it’s better to start preparations now rather than continue and wait for disaster to strike to make some changes.  And at the end of it, if disaster doesn’t strike, then I’m well on my way to some major goals I want to prepare for.

Is it just me that feels a need to accomplish a LOT before the end of the year?  Do you have any major plans for the next two months?

Why am I preparing for job loss?

In December 2007, I became a university graduate.  That date may or may not mean anything to you, but it is the date pinpointed as the official start of this recession.

I was unemployed through October 2008, at which point I had moved to Canada and begun working in a coffee shop.  In February 2009, my work permit expired and I moved home.  On that drive home I received news about a job opening.  Three weeks later, I moved to a new city and began working for my current company.  I was un/underemployed for 14 months and racked up huge amounts of credit card debt to cover it.

I admit I have been very, very lucky these past two and a half years.  The worry about job loss at the height of the recession didn’t faze me because I for the most part knew my job was secure.  That changed last March when the reality of my industry began to settle in.  I could very well lose my job in the next twelve months.

Which I haven’t… yet.

But I do want to talk preparing for an impending loss of job.  I did a quick search through my Google Reader and came up with three articles from one of my all time favorite blogs, Get Rich Slowly, that helped me figure out a plan of attack in case that happens sooner rather than later.  (If you’re interested, see Use a Financial Fire Drive to Prepare for the Worst BEFORE It Happens, Reader Story: Lay-Off Resistant Family Finances, and Turn Paranoia Into Plan B (Because Things Might Get Worse))

So what does my plan look like?

My current budget is broken down as follows, assuming an income of $2,200/month:

• Needs $1,200 – rent $600, util $150, auto $175, groceries $150, health/pet/other $125
• Wants $500 – includes dining out, clothes, cell, entertainment (major purchases have included concert tickets, books, new work shoes and a bicycle)
• Save $180 – I can’t psychologically make myself give this up while I’m making money
• Total = $1,800

If I lost my day job, my income would drop to $450 a month from my second job.  Luckily, that includes health insurance.  Unemployment will likely not be an option.

To decrease my expenses:

1. Switch to cash immediately (bye bye debit card!)
2. Cut saving
3. Cut all wants (in fact, I started this yesterday)
4. Chat with roommate regarding utilities/etc
5. Ask parents if I can hold car insurance payments to them
6. Defer my student loan for economic hardship
7. Instant savings approximately $850

To increase my income:

1. Find a job, any job, even minimum wage
2. Income of approximately $600 (assuming minimum wage at 25 hrs/wk)

Which would bring me to income of $1,050 and  expenses of $1,030.

Obviously the scenario isn’t perfect and things always change in real life, but it’s a start and it’s good to have a plan.  Additionally, under this plan I have an extra 10-20 hours a week (from working 60 – 70 hrs/week down to 50 hrs/wk) that I can use for volunteering, donating plasma, selling items, creating a business plan for my own business, etc.

And now I know that even in the worst case scenario, I will be okay.  What would you do in case of job loss?  What major aspects of your life would change?

I’ve kind of skirted around how much debt I actually have despite all the talk about what I’m doing to get out of it.  Well, no more.  I am very publicly admitting I am $13,756.53 in debt.

I put together this nifty spreadsheet to track my debt payoff plan and, hopefully, once I pay off my debt I will be able to use it as a way to track other major TBD savings goals (on a separate tab of course!).

Some notes on the spreadsheet…

• Emergency Fund is artificially inflated due to an insurance payment for vehicle damages.  Most likely will be used by December.
• Moving Fund target is $650 by March 2012.

View the full spreadsheet here.