Unemployment’s impact on our finances

While I’m enjoying my “retirement,” I can’t help but think about the major impact to my future financial self. Over the last seven months, I should have banked another $50k, minimum. When I look 10, 20, 30 years in the future, that’s a huge hit to my future net worth. Ah well, here’s hoping an offer comes through soon. I have one very promising opportunity, and I’m still trying to get more resumes and applications into the pipeline in case it doesn’t come through. And even if I get the job, it will pay substantially less money than I was earning at my last job.

Before I get into details, let me just say one thing…BEING DEBT-FREE IS UNBELIEVABLY HELPFUL in times like this. It’s enough to think about how to cover regular monthly expenses of food, gas, utilities. NOT having to worry about mortgage and car payments is just…WOW. It’s hard to explain a certain level of peace. Yes, there is still discomfort, but it’s not nearly what it could be.

We’ve been debt-free for the last five years, and in that time, we’ve accumulated a decent amount of savings, which is certainly helpful when a big chunk of your income goes away.

You already know that I’m a huge fan of YNAB budgeting software, and yes, OF COURSE, I’ve been using it to determine how far I can stretch my severance and unemployment pay in conjunction with my husband’s income. And I’ve even been modeling what my monthly budget could look like with this job I’m hoping for.

As a summary, here’s what we’ve faced in the last seven months:

  • With the loss of my job, our gross family income is down by 65%.
  • Hubby continues to contribute to his 401(k), although at a reduced rate, down from $24k/year to $18k/year. His paycheck also now covers our health, dental, and vision insurance, so the reduced 401(k) savings helps to cover this.
  • Hubby’s take home pay (after 401k and taxes/benefits) covers more than 75% of our necessary monthly expenses. Because we are debt free, our necessary expenses include things like food, utilities, property taxes (our largest single monthly expense), and medical expenses.
  • We have about $1200 of other expenses each month that are completely optional (kids’ activities, dining out, entertainment, clothing, charity) each month. Some of these categories (eating out, entertainment, and sadly, charity) have been greatly reduced since losing my job. If we spend all of these optional expenses, we are a little more than $2k short each month.
  • My net severance pay was $35k, and this covers about 15 months of shortfall.
  • Because of the large severance, I couldn’t apply for unemployment for nearly five months. Now that it has kicked in, I receive about $1500/month after taxes, reducing my monthly shortfall to only $750, allowing us to stretch the severance even more.
  • We had four months of digging into the severance @$2300/month, and then we could have as much as six months of needing to pull out only $750/month. That means that, after unemployment runs out at the end of January, I could still stretch the severance for maybe 10 more months, out to November 2018.

And I haven’t even touched my emergency fund, which holds a little more than my original severance check.

I hope to have an income by December. If that happens, I will still have about $22k of my severance left. I will assign those dollars to jobs that I need to increase our comfort level into next year…padding the car maintenance and vacation funds, starting a car replacement category, taking care of some trees we’d hoped to have removed last Spring, and catching up on some charitable giving that we’ve cut back on.

If for some crazy reason I DON’T have an income by the time the severance runs out, I really don’t want to dig into my emergency fund. I will try to find some work in retail, or anywhere else, that can help to cover the bills. Hubby would also likely cut his 401(k) savings even more so that we wouldn’t have to chip away at our hard-earned emergency fund. Because it truly wouldn’t be an emergency…yet.

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