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
Notes
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.
February 17, 2009
1. Positively antsy to get my/family taxes completed. Yes, this is my confession that I did not offficially file my taxes myself, again, this year. Gah. I’ll feel guilty about it later. I did my usual dry-run, and I think I’ve finally gotten things straight. If they match the accountant’s, I’m filing my own next year. *goal set!*
2. Got two ING Direct referral bonuses in the last week, courtesy of Flexo‘s awesome link-sharing policy. Thanks Flexo! [If anyone wants one directly from me, I’d be happy to send you one!]
3. Still waiting to see my check for the truck insurance refund. How sad, just $115. Stinks that they refunded it to a card I canceled, so I have to wait for that card to send me the check.
4. Expect to be doing the same run-around with the insurance refund on the sedan.
5. Food makes everything better: we’re going to potluck next week. This should be good.
May 7, 2008
Holy cheezits. I’ve got Bag Lady Syndrome today, and I’ve got it bad. I’m thinking to myself: 15k is good for an emergency (aka: I quit!) fund. But what about all those other things that could happen, like car problems ? That’s almost as certain as death and taxes, especially in the Ducky household. Or something goes terribly wrong with the house? Or if our rent suddenly increases astronomically? How would I cope with money-draining chaos if I’m reducing every expense I can think of and maximizing my income now, and still having a rough go of it?
PaDucky’s out of a job again because the company he was working for went out of business. He’s having a really hard time finding another one because of age discrimination. Prospective employers are telling him that they’re looking for younger people, which is foolish and rude. I wasn’t expecting to rely on his income any time soon, but he’ll certainly have to have one if I’m to implement my plan to move out.
Instead of panicking or becoming anxious, or resigning myself to living here forevermore, I kicked into super-analytical mode:
I should keep the 15k as a cash cushion for job loss.
Then start another emergency fund for catastrophes such as the above.
And bulk up the car maintenance fund by, say, another couple thousand.
And have a supplemental fund for rent, just in case the rent goes up insanely. [This is a possibility, our rent hasn’t been increased in years.]
And … and … and … whooooaaa!!!
That right there? I just tried to mentally justify building up 100k worth of what-if money because I’m paranoid. Where I’d get that extra 85k, Lord only knows, but the point is, I’m falling into that mentality where no amount is ever enough because I’m fueled entirely by emotion. Namely, fear.
It’s subsiding now that I’ve written it down and can see how ridiculous it looks on “paper”, but now I understand how easy it is to become Chicken Little and run from imagined terrors. I always wondered how people I consider comparatively or absolutely wealthy could look at what they have and still be afraid that they’ll be broke, but I realize that the problem is the mentality of what they don’t have, not what they do have.
It’s not that any of the above couldn’t happen, but a million other things that I couldn’t ever foresee could happen, too. I can’t live my life under a rock making lists of the things that could go wrong and how much money I’d need for it to be ok again. Silly ducky.
July 25, 2007
Many of your comments to my post on my parents’ possible business venture were great moral support and bolster to my common sense and caution. I truly wanted to hear your thoughts because this is an emotionally driven situation in which I feel a knee-jerk reaction coming on, instead of a carefully considered decision. And as Matt pointed out, if my instinct is telling me something, I should pay attention, whether or not I ultimately choose to listen.
There are a number of issues that concerned me with regards to the money-lending situation:
1. Can I afford to lose this money?
2. Would I resent the loss of this money? Or the waste of any profits, should there be any?
3. Is the business plan and market sound? Is there true long-term potential (we’re talking about years, not months)?
And then of course, Mapgirl came through with an extremely thoughtful and detailed response to my request. She had some great questions as well, a few of which I’ve borrowed for your perusal:
4. Did your parents ask you for the money? Or are you thinking of volunteering the money?
5. Do you want to protect your investment?
6. Do *you* think it’s risky?
7. Have you and your folks done the due diligence and talked to other owners besides their friend and his wife?
8. Do you want a say in how the money is used and when it’s paid back?
The huge red flag here is that I felt the need to ask for advice: if I were comfortable losing this money (or giving it away, since personal loans to family and friends are best considered gifts and repayments as bonuses), I wouldn’t need to ask. That means that I’d better have a very good reason for risking my financial security, if I choose to.
Another factor is that I’ve been retraining myself to stop thinking emotionally: that everything that’s mine is theirs. It can’t be, not if I’m going to make it out of this situation and help them in the long-term. I’m the saver, and they’ve been living on the edge far too long; they’ve lost sight of long-term planning.
I absolutely must be financially secure, and thriving, to be able to support them in their later years. Obviously, that means not throwing money away and not making unwise decisions. The need to help them upon request is born of that old habit wherein I rushed to the rescue in every situation, rather than judiciously, and as English Major pointed out, is probably more enabling than helping. What can I say? I was young and stupid. I’m not young anymore, so I can’t be stupid anymore either 🙂
So, could I afford to lose this money? I don’t include it as part of my net worth, I don’t count it in my savings plans and goals. For all intents and purposes, I don’t have that money until I recall the loan. It wouldn’t really be losing money, in the sense of having a big empty hole in my savings account. But would I resent the loss of it? Yes. Even though I don’t count it, knowing that it’s there and doing some “work,” and could be recalled is another form of emergency fund. In six months, if I really am out thousands of dollars because of my brother, I’ll need and want all the cushion I can get. In protecting this money, I’m protecting all of us against some level of financial disaster. Someone has to pay the rent.
3. Is the business plan sound? Magic 8-ball says: Wait and see.
4. Yes, Ma asked me if she could put some of the charges on my credit card that she’s an AU on. She doesn’t know if the wholesaler takes cards, but she knows that I prefer to use cards over cash, and it’s a good way to track expenses.
Again, I’m not comfortable charging anything that I don’t already have the money for, so I wasn’t in favor of this idea. She also floated the idea of using a 0% BT in her/Pa’s name, but I’m almost positive neither she or Pa’s credit has recovered enough to make that idea feasible. Last time we dug them out of credit card debt by transferring their balances to my 0% card. And eventually I paid off the remainder of the balance for them. Thousands of dollars later, I’m not putting another balance on my cards, even at 0% because I have tons of other savings goals to meet, not just pay-off-others’-debt.
5. I consider this a loan, not an investment, but perhaps there are advantages to thinking of it as an investment? If anything, I just want to give them a start, I don’t expect any profit from it. There are indirect advantages if they regain their financial independence, though, as the daily burden of supporting them would eventually ease. Still, that wouldn’t be expected in the early months.
6-7. My objection is primarily to the lending of money in a venture I don’t know enough about, but more light should be shed on the matter in the next several weeks. Pa is to research the market and plans to discuss the matter with some friends who own the businesses he’d like to supply. They’ll give him a better idea of the services they’d expect if they were to use him, and whether or not they’d be willing to come on board as customers.
8. I expect them to tell me how the money is being used (for inventory) and that it’ll be paid back as they begin to see a profit. However, knowing that Pa has a few other financial obligations that he’s being close-mouthed about, and that he’ll have to attend to those so that he doesn’t have to borrow from me, I’d have to accept that I wouldn’t truly have a say. Again, could I live with that? I’m not sure.
There are a lot of trust issues at play here, and the most important is that I’m not willing to see our relationship further corroded by resentment or arguments over business decisions. And, if I’m smart enough to see that they cannot work with my brother, I have to take a good look at whether or not I can work with them.
Tentatively, I think I could live with this: Ma thinks she can earn enough side money monthly to make a healthy repayment on the loan. Her most insiduous problem tends to be letting that money trickle away to pay Pa’s, or her unexpected, expenses if she doesn’t have a compelling reason to STOP touching that money. She can start giving me that money now and I’ll put it away in one of my high interest accounts while Pa’s doing his research. If enough information supports this as a feasible plan, I will see if I can reasonably supplement the pot with a rational portion of my own money, depending on how much I can save in the interim, and give the whole amount as a loan. Eventually, when they pay it back, I’ll take Ma’s portion of the seed money and keep it in savings for her.
I’ve got to learn when and how to say no, and saying “I can only help this much right now” is a start.
Scenario 2: With full expenses, two major trips, and unsubsidized Cobra
Scenario 3: With full expenses, two major trips, and subsidized Cobra