In which $10,000 makes the difference
March 20, 2009
It’s funny how an increment of $10k can evolve a game plan. Now that we’re past anticipation of and well into preparation for the layoff, I’ve been dabbling with numbers and colors on Google Docs spreadsheets. I need to know we’ll be “ok” if this trend of employers passively rejecting me, ie: not calling me back, continues.
Multiple scenario budgets have been projected based on remaining unemployed through December 2009. Barring emergencies, they reveal that:
A) We will be ok until the end of this year.
B) Assuming unemployment will supplement savings, we’ll survive beyond the end of this year.
C) I can afford to take at least one major trip (<$2000). For sanity's sake, I can't afford not to take that trip.
These revelations are fairly reassuring, at least until the New Year, at which point full scale, high grade panic will commence if I don’t have a job nailed down. It doesn’t matter if I still have $30k in cash. Without cash flow, I will be freaking out. Consider yourselves warned.
These three iterations made the most sense for modeling purposes.
Scenario 1: With full expenses, no major travel, unsubsidized Cobra
A) Both vacation and severance payouts are estimates, to be paid at the beginning of July.
B) “Travel” money every month is just an allowance. It’s not much, but you better believe I’m not just sitting on my butt at home all day every day.
Some thoughts. If anything goes wonky with severance and vacation, knock $5000 off that starting savings total. That’s a just-in-case. We’ll likely know by mid-June if they intend to be obstreperous.
I’d like to contribute $5000 to my 2008 and 2009 Roth IRAs, so subtract $10,000 total from the savings balance. But if I end this year with no new job lined up, that leaves between $23,000- 28,000 to start the new year.
Um. No. Voluntarily dipping below $25,000 cash savings is an no fly zone. Going below that number makes me fear for the still-nascent house fund, among other things. $30,000 would be much better. $40,000, even better. But you can see where this might lead: no trips, no rest, no travel, no life, no balance. While I’m fiscally conservative, timidity in financial planning is not my thing.
Speaking of fear, everyone’s fearful now so, according to Buffett, it’s time to be greedy. Not too greedy, but I do want to set aside some non-retirement investing money while the market is still trashed. Buy low, yes? A thousand bucks’ll be plenty because that low, low price might very well turn into zero.
After some consideration, I think this is the plan:
1) don’t allow anything to go awry with severance and vacation. Don’t mess with my money, boss!
2) don’t contribute to my 2009 Roth.
3) do contribute to 2008 Roth. ($-5000)
4) consolidate emergency cash into a single account, probably a money market given the state of my existing “high” yield savings accounts.
5) continue job hunting
6) plan an awesome trip that includes educational facets that I can add to my resume
7) find a few CDs and create a CD ladder for some of that money
8) research stocks, see if I can muster the confidence to commit to a few
If 2010 dawns with new job secured, I can contribute to my 2009 Roth, salt away something for the emergency fund while replenishing the expense cushion, and start seriously funding the house account. Ideally, that new job would require a move of reasonable distance and affordability.
Lists and spreadsheets laying out possible outcomes in a situation largely out of my control helps me focus my attention where it’ll do the most good. Then I can look at this job loss dead in the eye and call it opportunity.