Here are some things you can do today to prepare for your financial rainy day:
Have A Plan
If you suddenly found yourself unemployed and were unable to immediately replace the lost income, do you know what you would do? I suspect there are few families that have given a lot of thought to this. It is like buying a cemetery plot - it is not high on the list to things to consider. The drive home after receiving a pink slip is too late to start planning; at this point you should be in a position to start executing your plan.Prepare to Execute Your Plan
Schools and businesses have fire drills for a reason. We all know we need to get out of a burning building, but do we really know how until we practice. Several years ago, my employer had a fire drill and too many people were going down the stairs on one side of the building and this created a traffic jam. If it had been a real fire many would have lost their lives.In the same regard, it would make sense to take your plan and play "what if I lost my job today. " You need to understand the answers to these questions: How long can I go without finding a replacement job? Will my plan permanently damage my financial position? What adverse effect will this have on my family (kids' college, braces, house payments, etc.)? What is the worse case scenario? How will we fare in the worse case scenario?
Develop Alternative Income Streams
One of the best ways to ensure financial success is to develop alternative income steams. If one stream dries up, you have others to fall back on. We all have things we are good at, most can be packaged in a way to provide alternative income. Again, this is not something you can quickly develop, the process must be developed well before it is needed.Dividend Growth Stocks
One of the best alternative incomes are from Dividend Growth Stocks. Just like a regular job they can provide you a steady AND growing income. With advance planning, your income portfolio can become the foundation of your contingency plan. Here are several dividend stalwarts to consider when building your income portfolio:Colgate-Palmolive Company (CL) is a major consumer products company that markets oral, personal and household care and pet nutrition products in more than 200 countries and territories. The company has paid a cash dividend to shareholders every year since 1895 and has increased its dividend payments for 55 consecutive years. Current yield: 2.3%
The Coca-Cola Company (KO) is the world's largest soft drink company, and also has a sizable fruit juice business. The company has paid a cash dividend to shareholders every year since 1893 and has increased its dividend payments for 57 consecutive years. Current yield: 2.9%
Johnson & Johnson (JNJ) is a leader in the pharmaceutical, medical device and consumer products industries. The company has paid a cash dividend to shareholders every year since 1944 and has increased its dividend payments for 57 consecutive years. Current yield: 3.0%
Emerson Electric Co. (EMR) designs and supplies product technology, and delivers engineering services and solutions to a wide range of industrial, commercial and consumer markets around the world. The company has paid a cash dividend to shareholders every year since 1947 and has increased its dividend payments for 63 consecutive years. Current yield: 3.2%
Genuine Parts Co. (GPC) is a leading wholesale distributor of automotive replacement parts, industrial parts and supplies, and office products. The company has paid a cash dividend to shareholders every year since 1948 and has increased its dividend payments for 63 consecutive years. Current yield: 3.2%
3M Co. (MMM) provides enhanced product functionality in electronics, health care, industrial, consumer, office, telecommunications, safety & security and other markets via coatings, sealants, adhesives and other chemical additives. The company has paid a cash dividend to shareholders every year since 1916 and has increased its dividend payments for 61 consecutive years. Current yield: 3.5%
Exxon Mobil Corp. (XOM), formed through the merger of Exxon and Mobil in late 1999, is the world's largest publicly owned integrated oil company. The company has paid a cash dividend to shareholders every year since 1882 and has increased its dividend payments for 37 consecutive years. Current yield: 4.9%
AT&T Inc. (T) (formerly SBC Communications) provides telephone and broadband service and holds full ownership of AT&T Mobility. The company has paid a cash dividend to shareholders every year since 1984 and has increased its dividend payments for 36 consecutive years. Current yield: 5.6%
The Bottom Line
Even if you never lose your job, one day you will retire and will face a very similar situation. Your salary will go away, replaced by much smaller Social Security payment, and possibly a pension payment (for a shrinking group of employees). More and more retirees have to manage their nest egg to ensure you don't run out of money. A good plan, the ability to execute and multiple revenue streams including blue-chip dividend growth stocks will make the transition much easier.Full Disclosure: Long KO, JNJ, EMR, GPC, MMM, XOM, T,
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