The following is an article by contributing writer Kosmo… the second in what I hope will be a very short series.
In my last article, I mentioned that I had been given notice that I will lose my job in March.
One of the first things I did was assess my financial situation.
- My wife is employed and has a good benefits package. The entire family (us and the two kids) are on her health insurance plan, so we won’t need to use COBRA or go into the private market to get insurance coverage.
- If I stick with my current employer through the end of March, I’ll get 30 weeks of severance pay.
- I currently have about ten weeks of PTO built up. This will be paid to me at the time my employment with the company ends.
- I would be eligible for 26 weeks of unemployment, with a benefit of around $500 per week.
- The amount of money we have in liquid assets is equivalent to slightly more than a year’s worth of my take home pay. These are funds that can be accessed quickly and easily, with minimal tax impact.
So, in the short term, we’re in decent shape. Having insurance coverage is critical, and the severance, PTO, unemployment, and liquid assets, combined with my wife’s salary, would allow us to maintain our current level of spending for about two years before we exhaust our liquid assets. Of course, this wouldn’t be very smart, so we are looking at areas where we can trim spending. So two years is a conservative estimate.
- My mom passed away in July of 2016. We recently received our share of her estate and used it to pay down the mortgage and refinanced to a 15 year mortgage with the same monthly payment as the previous 30 year mortgage. At this point, we have 50% equity in the house.
- Although we haven’t saved as much for retirement as we would have liked, we have a fairly healthy balance in the accounts and could tap into those accounts in a worst-case scenario. I won’t get into the specifics in this article, because we have a few different types of accounts and the rules about loans and withdrawals vary. I’ll stress that using retirement funds for short-term needs is generally not a great idea and should only be considered in an emergency. [Editor’s thought: Roth IRA contributions can be withdrawn penalty-free, so if such an emergency does arise, this is widely considered the best place to start.
In a nutshell, we should be able to weather a storm of a year or two without having dramatic long term impacts. If my unemployment lasts even longer than that, we do have some additional sources of funds for the longer term. We’re in a better financial position than a lot of people who are facing the prospect of unemployment.
Now that I’m not worried about being homeless in the short to medium term, I can dial down the stress level a bit and focus on the actual job search. Future articles in this series will allow you to join me on that search.