Think slowing your 'burn rate' can keep you afloat if you lose your job? Here's why it probably won't last long — and what you should do instead Vawn HimmelsbachOctober 30, 2025 at 9:30 PM 0 A person holding burning cash.
- - Think slowing your 'burn rate' can keep you afloat if you lose your job? Here's why it probably won't last long — and what you should do instead
Vawn HimmelsbachOctober 30, 2025 at 9:30 PM
0
A person holding burning cash.
If you're furloughed or lose your job, do you know how much money you'd need to bridge the gap until you start getting a paycheck again?
This refers to your so-called "burn rate" — a term commonly used by startup companies to measure how quickly cash reserves are spent before they become profitable.
But it can apply to regular people, too. And it's increasingly top of mind with the private sector shedding 32,000 jobs in September, according to the ADP National Employment Report, based on the anonymized weekly payroll data of more than 26 million private-sector employees in the U.S. (1)
A burn rate isn't the same thing as an emergency fund. A burn rate is a measure of your monthly spending, while an emergency fund refers to money set aside for unforeseen events, whether it's a surprise medical bill or a job loss.
You can slow your burn rate — but it's not a replacement for an emergency fund. Here's why relying on it might not keep you afloat for long.
How you can slow your burn rate
One of the most obvious ways to slow your burn rate is to reduce your spending, from cutting back on unnecessary expenses, such as dining out, to pausing financial goals, such as saving for a down payment or contributing to a 401(k).
But that can be easier said than done from a psychological perspective. Joe Young of Mercer Advisors told The Wall Street Journal that he advises clients to think about pulling back their spending over three months. (2)
"If we say it's in perpetuity, it's a little bit harder to stomach," he said.
If you don't have a budget, it's a good time to create one — and to clean house. You might be surprised how much you're spending on discretionary items like clothes and personal care products.
And there may be some expenses you can cut out permanently, like monthly subscriptions that you forgot you were even paying for. How many times have you signed up for a free trial and forgotten to cancel?
When it comes to necessary expenses, like your mortgage or rent, utility bills and car payments, you could consider calling your creditors to see if you could pause payments for a brief period (to avoid damaging your credit score).
Try to make at least the minimum payment on your credit cards to avoid late fees and penalty interest rates (it will also negatively impact your credit score).
You may even be able to negotiate a lower interest rate on your credit card. Around 83% of those who asked for a lower interest rate on a credit card got one in the previous year, according to a LendingTree survey published in June. (3)
To slow your burn rate over the longer term, you could also look for ways to bring in extra income, such as renting out extra space in your home or getting a side hustle.
How to build an emergency fund
While a burn rate can slow your spending, it won't help if you only have, say, $400 in savings. As of 2024, only 63% of adults said they could cover a $400 emergency expense using cash or its equivalent, according to the Federal Reserve.
This is on par to other findings: Bankrate reported in June it found that less than half (46%) of U.S. adults said they had enough emergency savings to cover three months of expenses. And 24% had no emergency savings at all.
While a burn rate is a reactive strategy, having an emergency fund is a proactive strategy. Of course, this should start long before you're in a position to need those funds.
An emergency fund provides a safety net for a sudden expense (such as an unexpected medical emergency) or a sudden loss of income (like a job loss). Without one, you may have to rely on credit cards or loans to pay certain bills, which racks up more debt — and more interest.
Many financial experts recommend having at least three to six months' worth of living expenses in an emergency fund. And it should be set aside in a dedicated account that's both liquid and earns interest, like a high-interest savings account.
You can start by setting aside a portion of your paycheck until you've comfortably built up that emergency account. You could also beef up your emergency fund with one-time payments, like a tax refund or bonus at work.
However, if you've been laid off or furloughed, it doesn't hurt to slow your burn rate — even if you do have an emergency fund — since that can make your emergency fund stretch even further.
Article sources
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
ADP (1); The Wall Street Journal (2); LendingTree (3); Bankrate (4)
This article originally appeared on Moneywise.com under the title: Laid off? Slowing your 'burn rate' can help, but won't keep you afloat for long. Here's how to extend your survivability
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
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