A financial strategy after being let go

Written by
Peter Dunn

A guest post from a recently unemployed petetheplanner.com blog reader:

I get paid to make sure things don’t fail. I had always thought of myself as pretty good at it too - until this past November when my boss took me into his office to share that I still had a chance to be pretty good at it... somewhere else.

Thankfully, I'm in a pretty good spot to avoid any major financial stress that comes with losing your job. I've been using Pete's ideal household budget for almost a year after getting out of debt and it has served me well. But an ideal budget and a (small) stockpile of savings is not enough to keep my head above financial water. I needed a plan while I scour my city for my next gig.

Snapshot of my current standing.

My first step was to identify my current assets and expenses, making sure to include the value of my severance package.

Expenses & Assets (Before)

Expenses$Assets$Rent & Utilities600Checking1,200Transportation200Emergency Fund2,000Groceries & Dining Out350Long Term Savings4,000Entertainment250Severance6,800Medical25Misc. (Charity, Clothing, Savings, Etc.)1,220Total$2,645Total$14,000

Update: Since November, I've used my severance package to boost my Emergency Fund and Savings. At the end of January, I will have approximately $10,000 in assets.

Okay. What needs to go?

Identifying expenses I could completely remove was the next step on my budgeting adventure. Do I really need Amazon Prime and Netflix? Is now the time to buy clothing? Subscriptions and luxury items were the first to go. I slashed and burned my way through a number of expenses such as:

  • Haircuts are now free via a friend's brilliant set of clippers.
  • Work lunches? Not happening anymore.
  • Adios Spotify. Hello Pandora.

What can I reduce?

After identifying all removable expenses, I reviewed my budget to find those that I could limit, put on hold or continue doing for free. Groceries/Dining Out & Entertainment were gold mines.

I've found that being frugal doesn't mean I have a lower quality of life. I don't need organic groceries and I can wait to see Anchorman 2 on DVD. Being willing to change grocery stores or pass on a night out saves me at least $150/mo. (That's $1,800 annually for those playing along at home.)

What's coming up?

Unemployment forced me to take a good hard look at potential expenses coming up. The best example I can give is my new individual medical plan from Anthem. Recognizing that I wouldn't be covered in 2014 forced me to take action early which led to a lower monthly rate.

I made sure to check my calendar for upcoming social events, birthdays, and holidays. I took the approach that if I couldn't afford to give a gift or go out - it wasn't going to happen. That may seem extreme to some but that is just how I was raised.

The dust settles.

I'll let the numbers speak for themselves.

Budget (After)

ExpensesAmount ($)Rent & Utilities600Transportation175Groceries & Dining Out195Entertainment50Medical110Misc. (Clothing, Charity, Savings, Etc.)100Total$1,230

I slashed my budget by $1,400 per month.

After my budgetary assault, I formulated an appropriate job search timeline that took my expenses into account. My current budget will allow for a maximum of 8 months for networking, interviewing, and waiting.

Losing my job has been one of the best things to happen to me. I'm not saying it hasn't been painful or difficult, but knowing I have a strong grip on my current and future financial wellness is empowering.

Step up your financial wellness game.

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