I don’t know why my father insisted that a book about career change was a good idea for a 20-year-old college junior, but nonetheless I found myself reading Who Moved My Cheese? in the fall of 1998.
The wildly popular book is an allegory about two mice who try to deal with immense change, which unkindly arrives in their lives without an invitation.
I remember the book well and filed away its lessons. But at the time I was reading it, it didn’t apply to my career, which hadn’t even begun.
But now? Oh boy does it. As a professional financial problem solver, I’m a cheese guide.
The 1980s were an important point of transition for Americans’ retirement strategies. We went from a system primarily built on defined benefit plans (pensions) to a system reliant on defined contribution plans (401(k)s). In its essence, the transition shifted the onus from employers to employees. Now, a person needs to wisely use their 45 years in the workforce to build their retirement strategy brick by brick. It’s a lovely yet difficult process.
That is until your expected 45 years worth of building materials turns into 35 years worth of building materials.
Losing a job in your 50s is a devastating moment, especially if the job is connected to a long career ripe with upward mobility. As a frequent observer of this phenomenon, it’s as scary and troublesome as unchecked credit card debt or an expensive chronic health condition. This is one of the many reasons why I believe our 50s can be the most challenging decade of our lives.
Assuming you can clear the mental challenges, the financial and administrative obstacles can leave you feeling like a Rube Goldberg machine.
Income, health insurance, life insurance, disability insurance, bills, expenses, short-term savings and retirement savings are all immediately important in the face of a job loss. Never mind your Parent PLUS loans, financially-dependent aging parents, and boomerang children (adult kids who live at home), which might all be lurking as well.
When does your income stop?
From the shocking moment a person learns their job is no longer their job, the word “triage” must flash in bright lights like an obnoxiously large sign in Times Square. This is more challenging than you might think. Like a pickpocket bumping into you right before he grabs your wallet, the distraction is the problem that takes your focus away from the real problem.
This is hard to do because of the emotion that arrives with the dirty deed. The mind immediately begins to race to sources of money and relief. And unfortunately that relief is often found in the wrong place.
The first thing you should do is identify the exact day your job income stops arriving. That’s how much time you have to defuse the bomb. Your fuse may come in the form of a severance package, or work you’ve performed but have’t been paid for yet.
When do benefits kick in?
Next, and by next I mean five minutes later, explore your eligibility for unemployment benefits, and then file for them if you’re able. However, in some states severance pay affects your immediate eligibility for unemployment benefits. In other words, you can’t file for unemployment until your severance payments go away.
Assuming you can’t just retire at this moment, which you likely can’t, you must secure fresh employment income quickly. But quickly is relative to the length of your fuse. I’ve witnessed way too many people miscalculate the length and importance of their fuse. If you’re able to get back to work quickly, the initial job loss plus severance ends up enhancing your financial life. If you take too much time, by your choice or that of the cosmos, boom.
The next move is much more hands-on, and must also be performed the day you find yourself without a job.
What nonessentials do I cut?
Grab your bank statement, a marker, and a calculator. As much as you want to pretend its business as usual, you shouldn’t. Identify expenses that don’t make sense if you don’t have a job. Circle them. Add them up. Resolve to eliminate them for the time being, and possibly permanently. While this won’t necessarily lengthen your fuse, it could lessen the severity of a potential boom.
The idea of diving into your spending habits on the day you lose your job is no fun. But when else will you have such a powerful reason to do so? You won’t. It’s better than dipping into your assets to fund your current lifestyle. And that’s where we’ll pick it up the next time.
We’ve covered day one. In my next column we will tackle day two and beyond.
Peter Dunn a.k.a. Pete the Planner® is an award-winning financial mind and a former comedian. He’s a USA TODAY columnist, author of ten books, and is the host of the popular radio show and podcast, The Pete the Planner Show. Pete is considered one of the foremost experts on financial wellness in the world, but he’s just as likely to talk your ear off about bass fishing.