By: Revanche

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

Scenario 2: With full expenses, two major trips, and unsubsidized Cobra

Scenario 3: With full expenses, two major trips, and subsidized 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.

9 Responses to “In which $10,000 makes the difference”

  1. Miss M says:

    Did you qualify for the maximum unemployment? The top is currently $475/wk so you would get $1900 per month. Actually you get slightly over $1900 per month since months are longer than 4 weeks. That’s why I run a bi-weekly budget.

  2. Well-Heeled says:

    Um, YES to #6! 😀

    I’m also wondering about how one would go about qualifying for the $475 beneft.

  3. Sense says:

    I also calculate similar scenarios. for example, if I don’t get permanent residency, i’m headed home to VA in August. in the middle of a recession. with no contacts in my field or job prospects there. yuck! I give myself another two weeks for them to make a decision before I really start freaking out. Uncertainty certainly sucks.

    Knowing that you’ll be ok til December must be a huge comfort. It gives you a little time to relax before everything hits the fan. I think a good vacation is def. in order! although is it possible to take an enjoyable vacation under those conditions? i think i’d be worried about every penny i spent…

    but having $30-40K in the bank after income runs out isn’t too shabby, either. 😉 much luck to you that you won’t need it.

  4. Yes to the vacation!

    I know someone who was laid off about a week (maybe 2) ago, and booked a solo trip to Italy for about a week, leaving in about a week! I wonder if I’d have the guts. (she’s going to grad school in the fall and planned on quitting job in june anyway)

    Things are looking pretty much as good as they can, given the situation. Good luck with it all!

  5. mOOm says:

    If you want to put money in the Roth I’d suggest doing it and parking money in a very low risk option. You can then withdraw those contributions later if it turns out you need them.

  6. Revanche says:

    Miss M: I’m pretty sure I qualify for the max, but I wasn’t sure at the time I started the calculations. For now, I prefer to err on the side of caution when it comes to calculating income. Too much uncertainty.

    Well-Heeled: The add’l $25 or just the max? Because I’m sure you do qualify for the max, and they automatically add the extra $25 so you don’t have to do anything for that.

    Start your planning engines!

    Sense: Bleck, I really hope you hear soon. I’m actually concerned that I wouldn’t be able to enjoy a vacation, that’s why I’m making it a working/learning vacation. As long as it’s something totally different, and I can put it on my resume, I will feel better about it. And that’s also the point of this exercise; if I didn’t run the numbers, there’s no way I could go. And there’s also a budget: less than $2000 per trip (or maybe < $4000 for a longer one). Don't know if it's actually doable, but I think it might be. Time for more research! stackingpennies: OMG, see, I wouldn’t have the guts to just suddenly up and go like that. I’m trying to make it possible now, but if I were coming off a sudden layoff? Nay!

    mOOm: “very low-risk option” is exactly what I’m looking for. I’m just not sure what that is just yet, and am running out of time to make up my mind.

  7. mOOm says:

    In other words keep it in cash if you want to be very safe.

  8. Do you have a master’s degree? If so, community colleges are hiring part-time faculty in a lot of fields. In most states, all it takes is an M.A. or an M.S. and you’re in. Pay is ridiculous, but it’s a lot better than nothing.

    During recessions, community colleges are flooded with returning students. Just now, state and county colleges are suffering economically, too, and many have freezes on hiring full-timers. So they’re making up for people who have retired or moved on by hiring adjunct faculty. An extra income stream could help a lot to make that emergency fund stretch.

    Problem is, of course, you can’t get unemployment when you’re receiving a pittance somewhere else.

    BTW, two low-risk options for the Roth are Vanguard’s Prime Money Market Fund (low returns, too) and Vanguard’s Short-Term Investment-Grade Fund Investor Shares. Latter is losing a bit just now–it’s short-term corporate bonds, so when the market’s down, it edges up, and vice versa.

  9. Revanche says:

    mOOm: Thus far, that’s where it’s stayed.

    Funny About Money: I don’t. One of my biggest regrets is not taking advantage of the tuition remission available as part of my benefits. But I’ve hashed and rehashed that several times with myself, nothing to be done for it if I wanted to pay bills and save money.

    Making a pittance and losing UI would not be the worst part for me since I would do it as long as I could maintain at least as much as UI. I would not (and haven’t confirmed that this would happen) want to lose COBRA, though. Actually, I assume that I have COBRA until it runs out, but even the unsubsidized bit would take a huge chunk out of whatever income flowed in.

    Thank you for the suggestions, I was just looking at the Vanguard Prime Money Market and hesitated too long to purchase for the 08 tax year. Ah well. There’s always 09.

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