Author Topic: Husband job loss - how nervous should we be?  (Read 7174 times)

pandastache

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Husband job loss - how nervous should we be?
« on: February 08, 2018, 02:11:32 PM »
This is my first post although I have been following this forum for over a year.
My husband will be out of a job in less than two months. It doesn't appear that he will get much of a severance if any at all. I am a teacher.  My son is in college and up until now we have covered his college costs without loans. We didn't qualify for assistance because we both work. I am wondering if this will change significantly?

My main question is from looking at our expenses, if he doesn't find a job will we be okay? Our general expenses monthly are expenses that come up during the year that are not regular monthly expenses (oil, water, lessons, school fees, furnace maintenance, septic, etc.).



Topic Title: Husband will lose his job in less than 2 months. What kind of shape are we in? Should we panic? Any suggestions for the future? Most of our funds are in retirement accounts and we cannot access them until 59.5.

Life Situation: Married Filing jointly
Husband: 55 years old
Wife: 56 Years old
Son 1: 19 years old in college
Son 2: 16 years old

Gross Salary/Wages: Me: 96,356 (includes regular pay plus stipend)

Individual amounts of each Pre-tax deductions (yearly)
Medicare:    1396
401 K    15,600
Fed tax    13078
State Tax    4030
Ret MST 8% 7696
Ret MST 30K 1326
Life Ins.    988
Disability    910
Sta Teach 1032

* New due to job loss, I will have to purchase health insurance - potentially 1000 per month, cheapest insurance is 550 per month (there are deductions - not sure what they are yet.)

Other Ordinary Income: Intermittent side work  - 1855 per semester


Adjusted Gross Income: 50, 300(not including side job)


Monthly Current expenses:
Mortgage : 778.57
Escrow: 477.43 (insurance, property tax)
Accidental home insurance : 20.00
Gym: 40
Life Insurance: 38.50
Instrument rental (son): 60.00
Hulu: 7.99
Phone: 40.00 (landline - connected to our security system)
Electric, Internet:  160.00
Disability insurance 53.19
Life Insurance (husband) 51.00
Heloc: 50.00
Scholars choice (college) 200.00
Auto - 2 cars (19 year old insured on 1) 247.00
Gas: 120.00
Food: 500.00
Miscellaneous: 900-1000 est. monthly (includes, water, excise tax, school sports fee, music lesson, clothing, school supplies, tracfones, additional life insurance, heating oil, school bus fee, school activity fee, alarm system, holidays, 1 week at camp)
Car Payment: 354 (last payment in May)

Additional:
College payment 2500 per month (possible coming out of brokerage account)

Assets:
Husband Retirement
403 B       479,510
IRA          18,206
Brokerage Acct.    10,228
Rollover      181,388
Roth         26,978
TSA         42,574

Me Retirement
Rollover      18,019
Roth         28,097
403B         503,367

Liquid:
Checking      17,736
Non retirement brokerage 99,289 (inheritance - possibly use towards college)

Liabilities:
HELOC: 10,000
House: 135,000

Notes:
Son 1 in college - did not qualify for aid due to 2 incomes
We were trying to get him through without loans. He is applying for numerous scholarships, works and contributes towards tuition. We could use the 99,289 towards some college tuition (this was an inheritance and we wanted to put it towards college)

Health insurance - I will have to carry this now - Choices are 550 per month for cheap insurance, 1000 per month (for the equivalent of what we are carrying). Both have deductibles.
Younger son is a musician - considering it as a major in college - we don’t want to give up his lessons.

Eligible for pension at 60 for approximately 58% of salary. Amount goes up each year I work to a max of 68%.



CrispKale

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Re: Husband job loss - how nervous should we be?
« Reply #1 on: February 08, 2018, 02:40:22 PM »
Based on the numbers I see you will not be able to cover current expenses on your own even before adding in the new health insurance. This calls for emergency crisis mode in which hard decisions must be made. Don't fret it won't be forever however you cannot fully guess how long this will go on and so it is dangerous to make assumptions the savings will not run out before its over. I know you want to continue paying for college but what will you do when the inheritance savings runs out and husband is possibly still not fully employed? I worked full time thru college paying my own way and I think its the best thing my parents did for me as far as appreciating what I had earned and studied. The gym can be cancelled, your son can speak to the school or teacher to work out a temporary work assignment instead of the instrument fee, the food bill can definitely be cut in half no problem. The additional school fees can usually be waived if you talk to the school and work out an arrangement, all clothes and misc. expenses can be temporarily halted, just use what you already own. Squeaking by during this time is doable based on what I see but not without all family members pitching in and making cuts.

4n6

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Re: Husband job loss - how nervous should we be?
« Reply #2 on: February 08, 2018, 06:58:42 PM »
Here is the good news. You have over $1 million in investments. That is FANTASTIC! If this would've happened at 59 1/2 you wouldn't have much of an issue. And the insurance will put a strain on your budget, it puts you about $900 or so in the hole each month (if it is $1000). It could be more if you continue to pay $2500 a month for your son for college (not out of the brokerage account).

The other piece of good news is that you know this will happen in a couple of months so you can plan a little bit, plus your husband will most likely get unemployment of some kind that will probably be over $1000 a month (I am assuming) so that could cover you for 6 months or so. So we have 8 months of income that your husband will have.

There are some things you can do.

1) Just save as much of your income over the next 2 months as you can to give you a bit of a buffer.
2) Make sure he applies for unemployment immediately after he is laid off.
3) What kind of thing could he do on the side? Uber, Lyft? Is there a side hustle he can make some income? What are the prospects of him earning a small income after he is laid off?
4) You try to get access to some of your retirement accounts before 59 1/2 by using the 72T rule (search on this forum for the details).

In other words, I wouldn't panic too much. You have a lot of assets, you are working, but the extra insurance will poke a hole in your financial boat. You just have to plug the leak. Good luck and let us know what happens.

pandastache

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Re: Husband job loss - how nervous should we be?
« Reply #3 on: February 08, 2018, 07:50:52 PM »
Thanks for your response.

It didn't really occur to me that I should let the life insurance go. I have 500.00 in life. There are several different policies which is why they are listed in miscellaneous also. I'll look into the SS benefit for my kids. I don't contribute to SS but I have a pension that is worth about 170, 000,

The miscellaneous category includes heating oil, school activity fees, septic, quarterly water bills, etc. We won't be able to apply for a reduction in activity fees until my husband is out of a job.

We will be talking to my son about next year's tuition. He will have to take out loans. We can't do anything about this year's tuition though because my husband is still working.


Peachtea

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Re: Husband job loss - how nervous should we be?
« Reply #4 on: February 10, 2018, 09:59:57 AM »
It looks like to me that you’re completely fine as long as you stop covering your son’s tuition and expenses next year. Your husband could choose to just retire, or maybe look at low stress part time jobs to help out with son’s education. I say this, because without tuition your yearly expenses are about 47K and your take home 50K. You also have a lot where you can reduce, so maybe take the layoff as an opportunity to trim some financial fat.

It’s nice you want to pay for your kids school, but your retirement planning is more important. (I had to take out loans for all my schooling and I’m fine.) When I was in undergrad my parents joint income was around 45K gross and I received a very small (less than $1000) pell grant for only one year. So your lower income next year might get your son qualified for more federal loans but not necessarily “assistance” in terms of free money. Don’t take out parent plus loans. If 2500 is just tuition or tuition plus living for 12 months, that seems high, like your son is going to a private school. If so maybe he could look into transferring to a lower cost school. And either way he should look at taking summer classes to graduate early and save on tuition. Best thing I did was graduate in 3 years instead of 4. That said I would also drop the $200 scholars choice savings, and just put that towards 19 year old current schooling instead. Then when 16 year old enters university give him that $200 a month.

I think you’re way over insured. In my mind, the point of life insurance is to support spouse/minor kids if you die early and essentially to make up for a lack of necessary income. Same with the point of disability insurance, except in case you can’t work anymore. But given the ages of your kids and the amount of your asssets you can self-insure. Your assets already equal 51K x25, and your expenses are 47K. So even if both your husband and you lost your jobs now you could live off of what you have in assets. (Plus you’ll later get a bump from your pension and SS, which should cover any increased medical expenses when your older.) And there is more than enough to support your 16 year old for two years. See this thread about accessing retirement money penalty free before 59: https://forum.mrmoneymustache.com/investor-alley/how-to-withdraw-funds-from-your-ira-and-401k-without-penalty-before-age-59-5/. And remember that in a worst case scenario you can always withdraw retirement funds early with a 10% penalty.

I add up $270 a month in all the insurance you could drop - all your life and disability, including ones in yours payroll, plus accidental home insurance (you can self-insure this!). And you say you have even more insurance in the 900-1000 miscellaneous section! You could probably pay for your new health care premiums just by dropping your other insurances. Plus you have money to cover high deductibles. So you should go with a cheap low deductible health insurance unless you have high medical needs.  And you should reevaluate your property and auto insurance to see if you can lower premiums by switching to high deductible plans.

Go out and buy your 16 year old an instrument, save $60/month. In general, instrument rentals are a rip off. If you add up the monthly costs over the years, how many used instruments could you have bought??? I would only ever rent for an elementary/middle schooler who is just starting out and I’m not sure if they will stick with it. Does your 16 have a job? If so, he can help contribute to the instrument if he wants a particular high end brand that is more expensive. Do a little bit of research and/or have your son ask the music director what are mid-level reputable brands. Check out Craigslist’s for used ones, and mentally add $100-200 in possible basic repairs to the price, like new pads. If you can’t find anything on Craigslist’s then try eBay, but be careful of only buying reputable brands there. And last resort go to a used instrument shop.

Finally, why do you need a home security system? Do you own really expensive things that aren’t covered by your home insurance? Live in a particularly dangerous area? I’ve had my apartment broken into before and even given that experience I wouldn’t get a home security system. If you’re paranoid like my parents, check out lower costs security methods. There are video wifi door bell systems that are as less than $100 (one time). For a few hundred dollars, you can buy a couple cameras for your house that records to the cloud when someone goes by senors or makes noise, etc. Door plate covers that prevent crow barring are only $25 ish. If you’re not tech savvy, I’m sure the 16 year old would have fun setting up the equipment. If you drop the security system, not only will you save that monthly cost, but you can also drop the $40 land line.


pandastache

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Re: Husband job loss - how nervous should we be?
« Reply #5 on: February 10, 2018, 01:53:16 PM »
Thanks Peachtea,

You are the second person to comment on the life and disability insurance. I never realized we might be overinsured. This is something we are going to look into.
We are on the hook to finish off payments for our son's college this year. We didn't qualify for any assistance and we were in good shape so we thought we would cover this for him this year. He is at an in-state school and he has two small scholarships. The price does include room and board so next year if he moves off campus we expect that price to go down. He does contribute yearly to his tuition. We just thought we could help him complete this year. We are on the payment plan so now we have a few months to go. We already told him we can contribute nothing next year unless the job situation changes. On the plus side, he has been spending much of his spare time applying for additional scholarships. He will be home next weekend so we can have an honest talk about our situation.

The rental is high because it is a string bass. String instruments are fairly expensive so we would be cautious about what we would purchase if our son goes into studying music. He is a pretty serious musician. Fortunately, we have some good friends in the field that can help out with that. We are currently looking into that.

I know our other big expense are the activity fees for school. The sport fee per season is 300. Our 16 year old shovels driveways during the winter (good gig in NE) during the non sports season. I believe he is looking into camp counseling for the summer. I believe we are going to make him pay for the sports fees or his lessons.

We have some additional trimming to do I know. I am grateful we started saving as early as we did.

Thanks for your help!

Rosy

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Re: Husband job loss - how nervous should we be?
« Reply #6 on: February 12, 2018, 07:13:11 PM »
Hi pandastache:)
You are in the type of situation that may come to haunt us, so I can relate. 

1. The health insurance will be a big new budget item. It needs to be sorted out immediately. You need hard numbers and you need to know what options you have.

2. Life Insurance - I'm with Ihamo. Keep enough life insurance to cover your mortgage in full. I would not keep such an important asset unprotected - being able to pay off the mortgage gives you enormous leverage and freedom during the worst of times if something were to happen to one of you.

Never blindly cut insurance without understanding what exactly you have and why you need it or why you can or cannot drop it. Evaluate, talk to at least three people, research online and talk to a professional or two before you make a decision.
I'm always non-plussed how quickly people say drop the insurance without having seen the policy. Do the math, for how much longer do you have to pay the premium... consider your circumstances and the pros and cons.

3. You can probably drop the Accidental Policy, but you need to know what you are doing and why and how you will deal if you have to cover this out of your own pocket.
Your normal medical insurance may be all you need, this Accidental Policy may be nothing more than a nice to have extra coverage that you can't afford to carry any longer.
Unless it is ridiculously low, locked in premiums that in the end make no difference to your situation now, but would bring major benefits down the road.

Use your common sense and don't panic, you have time - one phone call or an e-mail is all it takes to cancel a policy. It's a quick and easy cost savings, just be aware of the possible consequences.
 
4. Otherwise, go in full hunker down mode until you know how much unemployment if any, your husband may collect and for how long.
He has two months to find a part-time job, network and/or find a full-time job, if it makes sense and his skills and health allow him to do so.

5. Son in college - regardless of what you signed and agreed to pay for him - his parents income has changed and like Ihamo said, this will change his eligibility (upon which your payments were based) in two months. Doesn't hurt to look into it and have everything prepared in advance.
It doesn't hurt to dig a little and educate yourself before accepting someone else's answer of what you have to continue to pay.

Parents needs in retirement trump College kid expenses - he can deal, you are too close to retirement, you are currently not in a position to help.

6. Bottom line, looking at your income and expenses you should be fine by next year. Do all you can to cut costs and optimize your expenses to the hilt in the next two months. This is doable!:)
 
Prepare for the worst - hope for the best:) - Good Luck!


Ben Kurtz

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Re: Husband job loss - how nervous should we be?
« Reply #7 on: February 14, 2018, 05:56:35 AM »
Don't panic.

Do millionaires panic over the occasional financial hiccup? You're millionaires. You shouldn't panic.

I have your net worth down as at least $1.4 million, plus the equity in your primary home. To most followers of this website, that's enough money for the entire family to declare financial independence and quit work. Yet, you plan on continuing working in a $100,000 per year job while living a very reasonable and thoughtful lifestyle. You're more than fine.

I calculate your annual income and expenses (assuming your husband loses his job and only collects $6,000 in unemployment for the year thereafter) showing a net cash flow deficit of $26,362.16 assuming you add $1,000 a month in health plan expenses to what you currently list and continue to pay your older son's college tuition. Interestingly, I have your retirement contributions in the same period at $25,654.00, meaning you are only $1,000 net negative, before implementing any cost savings.

Of course, with this budget you are in effect swinging from being healthy savers to barely making ends meet on your wage income -- but I wouldn't worry too much about that. The point of having $1.4 million in liquid net worth is to allow yourselves to slow down at some point and start living off dividend income instead of wage income. At the very least, further savings at this point is optional -- your retirement is very well funded, with $1.4 million of investments in the bank plus (if I read your post correctly) a healthy defined-benefit pension which becomes available in a few years plus (I am assuming here) some amount of social security entitlement on your husband's earnings history down the road (which, if you both are in good health, should probably be delayed until age 70).

Others have pointed out specific areas where you can probably save money on your regular spending, and I generally endorse them; however, I would review your insurance policies and needs carefully before cancelling them. The premiums are not onerous, and once you are in your 50s it can be difficult to re-qualify for life and disability insurance if you realize a year from now that you'd rather carry more. Even though you have ample savings and no truly critical dependents (i.e. young children who can't fend for themselves), the death or disability of one spouse can still impose burdens: the survivor might end up having to outsource more domestic labor (yard work; meal preparation; driving; etc.), and there are still mortgages and college tuitions to consider.

I would also phone up the college's financial aid office and ask about how to re-file in light of your husband's impending job loss. There may be more scholarship money on the table next academic year, or at least some federal student loans (a portion of which ought to be subsidized, meaning the government waives the interest charges while the student remains in higher education). I don't think you need to cut off all assistance to your son, given your comfortable financial position, but it is more than reasonable to ask him to step up his game and borrow federal loans while you cut back in light of the circumstances.

Assuming you can save $10,000 per year in cash flow (between cutting household expenses and your older son getting more financial aid / student loans), you'll be about $15,000 cash flow negative per year in your cash accounts. Which is fine. You have $17,000 in cash, $110,000 in taxable brokerage accounts which would cost you, at most, capital gains taxes to access, and $55,000 in Roth IRA accounts -- which allow you to pull out principal (but not earnings) tax and penalty free (you tell me how much of that is principal). You could easily sustain 10+ years of negative $15,000 annual cash flow  without triggering a single taxable withdrawal from a retirement account.

Plus, you can pull money out of regular IRA accounts penalty free (but the withdrawal is still considered taxable income) for educational expenses of immediate family members. Plus you can set up 72t SEPP withdrawals on various of your retirement accounts to get more money out penalty free (again, the withdrawals will likely count as taxable income). Plus you are not far away from age 59.5, when you can just take money out of your retirement accounts when and as you wish, the way God intended them to be used.  So there is zero reason to panic over the idea that you have a big pile of money out there but you just can't gain access to it. The truth is, you have plenty of money that you can get to very easily.

Here is how I cut your numbers:
Annually   Income & Expenses:   
$96,356.00   Salary   
$3,710.00           Side job   
$6,000.00           Spouse salary / unempl.   
-----------------------
$106,066.00   Gross Annual Income   

-$1,396.00   Medicare tax   
-$13,078.00   Fed income tax   
-$4,030.00   State income tax   
------------------
$87,562.00   After Tax Income   

-$988.00           Life insurance   
-$910.00           Disability insurance   
-$12,000.00   Health insurance   
-------------------
$73,664.00   After Insurance Income
   
-$15,600.00   401k contribution   
-$7,696.00   Ret MST 8%   
-$1,326.00   Rest MST 30K   
-$1,032.00   State teacher's fund   
-----------------
$48,010.00   Take Home Pay   
-----------------

Annual    Living Expense          Monthly
$5,729.16   Mortgage escrow (TI)      $477.43
$240.00   Add'l home ins.         $20.00
$480.00   Gym               $40.00
$462.00   Add'l life ins.         $38.50
$720.00   Instrument rental      $60.00
$95.88   Hulu               $7.99
$480.00   Landline phone         $40.00
$1,920.00   Electricity + internet      $160.00
$638.28   Add'l disability insurance   $53.19
$612.00   Life insurance (spouse)   $51.00
$600.00   HELOC repayments      $50.00
$2,400.00   College savings contrib.   $200.00
$2,964.00   Automobile maint. + ins.   $247.00
$1,440.00   Automobile fuel         $120.00
$12,000.00   Misc.            $1,000.00
$4,248.00   Automobile payment      $354.00
-------------------------------------------------------
$35,029.32 Reg living exp. ex. mort.   $2,919.11

$9,342.84   Mortgage (PI)         $778.57
-------------------------------------------------------
$44,372.16 Regular living expenses   $3,697.68

$30,000.00   College tuition      $2,500.00
-------------------------------------------------------
$74,372.16   Total living expenses   $6,197.68
-------------------------------------------------------
-$26,362.16   Net cash flow   
-----------------------------------
-----------------------------------
      
      
Balance sheet:   

$479,510.00   Spouse 403B   
$18,206.00   Spouse IRA   
$10,228.00   Spouse taxable   
$181,388.00   Spouse rollover IRA   
$26,978.00   Spouse Roth IRA   
$42,574.00   Spouse TSA   
$18,019.00   Rollover IRA   
$28,097.00   Roth IRA   
$503,367.00   403B   
$17,736.00   Checking   
$99,289.00   Taxable - inherited   
-$10,000.00   HELOC   
-$135,000.00   Home mortgage   
$135,000.00   Home value (at least - add'l equity not included)   
------------------
$1,415,392.00   Net Worth   
« Last Edit: February 14, 2018, 06:07:32 AM by Ben Kurtz »

ShoulderThingThatGoesUp

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Re: Husband job loss - how nervous should we be?
« Reply #8 on: February 19, 2018, 05:00:55 AM »
What is your home’s value? Can you downsize, or move to a worse school district when your second son finishes high school?

2Birds1Stone

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Re: Husband job loss - how nervous should we be?
« Reply #9 on: February 19, 2018, 06:03:41 AM »
You're millionaires and even without your husbands income you're grossing almost 6 figures, which is roughly 2X the median US household income.

You will be fine, take a deep breathe.

itchyfeet

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Re: Husband job loss - how nervous should we be?
« Reply #10 on: February 19, 2018, 02:28:09 PM »
The US is currently at full employment so the odds of your DH finding a job are as good as they would ever be.

Take a deep breath. I am sure things will turn for the better.

beltim

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Re: Husband job loss - how nervous should we be?
« Reply #11 on: February 20, 2018, 03:32:12 AM »
One thing that jumps out to me is that you're currently drastically overwithholding on taxes if you go down to 1 income for your family.  You should run more detailed calculations, but I'd be shocked if that didn't free up more than $5000 per year alone.

pandastache

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Thank you!
« Reply #12 on: February 20, 2018, 09:38:57 AM »
Thank you to everyone for looking at our current situation.
We are working out numbers.
I never thought to look at our insurance needs - although I will look carefully. I know that we would not be able to get it back if we cut it out.
I will also look at our taxes. My husband still has a month or two of work left. He goes in for the paycheck and is doing his best not to give them an excuse to let him go so that he can collect. It is taking it's toll on him though to do that. He has read your responses and that has helped tremendously!
Because he is still working we are unable to do anything about the tuition we owe this year. The appeal process requires my husband to be out of work for 8 weeks before we apply. In the meantime, my son has applied for many, many scholarships and he has several appointments for summer jobs in March. That's a good thing.
As far as our house is concerned - someone asked if we could downsize. Our house is only 900 square feet with 2 bedrooms. We live in a HCOL area so this house has allowed us to save a lot of money. We have some land with it so we are hoping to have that looked at once my son is out of high school.
Thank you all for taking the time to look at our situation and offering suggestions that I hadn't thought of and of course for reminding us to breathe. This has really helped.

dandarc

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Re: Husband job loss - how nervous should we be?
« Reply #13 on: February 20, 2018, 09:49:53 AM »
More than $1 million + a $90K income.  I think you'll be fine.

Dicey

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Re: Husband job loss - how nervous should we be?
« Reply #14 on: February 23, 2018, 09:03:55 AM »
One thing that jumps out to me is that you're currently drastically overwithholding on taxes if you go down to 1 income for your family.  You should run more detailed calculations, but I'd be shocked if that didn't free up more than $5000 per year alone.
I agree with beltim and go one further. Another way to free up cash is to do this with your withholdings: As soon as you get to the amount you owed on your taxes last year, shut off all state and federal withholding. All you have to have withheld is what you owed the previous year. This will boost your take-home pay, right around the time DH's last paycheck from this job rolls in. It's completely legal, but people don't do it often. Your HR might need a little coaching: give them plenty of notice*. Should you end up owing a little a year from now-ish (not likely under the circumstances), you have the savings to cover it. This is a smart way to boost your cash flow as you adjust to these changes.

*Because I was paid monthly commission, even with 10 deductions, my company was seriously overwithholding. I was getting huge (10k+) refunds. My CPA advised this method, which worked perfectly. I was literally the only person in our entire sales force who did this. Eventually, HR got used to it, but there was a lot of pushback at first. I still got refunds every year, but they no longer had commas in them.

And add my voice to the chorus chanting, "You'll be fine, you'll be fine,  you'll be fine." This is the rainy day you saved so dilligently for.

robartsd

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Re: Husband job loss - how nervous should we be?
« Reply #15 on: February 23, 2018, 12:19:43 PM »
Be sure to contact your son's school financial aid office to discuss your change in means - they can probably make adjustments for next year's financial aid offerings - it might just mean better loan offers (subsidized), but perhaps there are need based grants that he would qualify for with your reduced income.

midwesterner1982

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Re: Husband job loss - how nervous should we be?
« Reply #16 on: March 15, 2018, 01:20:17 AM »
panda - You'll get through this.  Kudos on your excellent saving over the years.  I hope you and your husband will spend more time in the forums here.  I'm fairly new but I'm amazed at the quality of folks here.  One tip I have learned is that the best folks on here have journals and they read each other's, often offering thoughts and support.  I'd encourage you to check them out.  They might be able to offer support on the psychology side of things.

Socratease

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Re: Husband job loss - how nervous should we be?
« Reply #17 on: March 26, 2018, 09:52:23 PM »
If you haven't already, I'd also touch base with a financial aid counselor at your son's school. A parent job loss would very much change your Expected Family Contribution (EFC), which is what the FAFSA calculates. So your son might now be eligible for additional funding through Pell, Supplemental Grants or Work Study programs. It's definitely worth doing some research.