How to Prepare for the Possibility that You Might Lose Your Job

Gary North nails it. This is powerful advice. I read somewhere that Bill Gates, early on, never took on a new project unless he had 6 months worth of cash reserves, so that if Microsoft lost all income he could still sustain the company during the period. This is North providing the advice on the personal level:

I think lifestyle preparation is more important than survivalism. I think it is wise to begin to prepare for a sharp loss of income before this loss of income takes place. The individual begins to budget his time and money in terms of building up reserves for a time of unemployment that lasts longer than the head of the household would otherwise expect.

My belief is that a person who has just lost his job should put in a minimum of eight hours a day in searching for a new job. He should develop a systematic program of contacting potential employers. He should not worry about the loss of income. He should not be out looking for some fast-food restaurant job just to make payments on a relatively small proportion of his monthly expenditures. A middle-class household develops monthly payment routines that are far beyond what a fast-food restaurant job can maintain. So, the most important thing that a person has in reserve is a way to free up time for a major job search. The reserves should be geared to buying time for this job search.

Anything that you can do today that will shorten the job search is a good investment. I regard this as the most important single source of reserves in the scenario that I think is most likely to strike[...]

 Budgeting for a Lifestyle Contraction