Author Topic: Liquidity and job security question  (Read 4489 times)

NWstubble

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Liquidity and job security question
« on: January 14, 2013, 11:36:21 PM »
I have dissected and analyzed my situation, but wanted to have a few mustaches have an go at it. I subscribe to the idea of having one's money working for them and thus wanted to only keep a relatively small cash reserve and use something similar to the HELOC e-fund concept. However, times they are a changin'.

I am currently debating increasing our cash savings. My employment situation has become less stable, with my current employer downsizing our branch location and implementing a new strategic plan that undoubtably will lead to my position moving to a different location. To make the story short, a move for this job is not likely something we would be willing to do. So that leaves me in uncertain waters and thinking about how to play this safe financially. We do not currently have any invested assests outside of retirement accounts and with the reality of a job change now looking me in the face I am not sure I can take what cash we have and put it in the market without some potential heartburn (face-punch for being a wuss?) So, the idea being to increase our cash safety net.

Other details that may or may not matter:
My career field is not common or very easily transferable, meaning it will take me some time to find other opportunities.
We are both contributing to pre and post tax retirement accounts.
I was thinking of increasing cash to equal six months of my salary.
The job change is not likely to happen in the next six months, but I don't know when.

As always, I look forward to your insights. Hopefully I have provided enough information.

marty998

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Re: Liquidity and job security question
« Reply #1 on: January 14, 2013, 11:58:51 PM »
no face punch from me. You have your head screwed on right for actually thinking of these things before they happen.

If you were in Oz I would say mortgage offset is the best option. Next best is cash.

Would you be entitled to a redundancy payout if your job was cut? The size of that would also have an impact on how much of a buffer you need to build up.

twinge

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Re: Liquidity and job security question
« Reply #2 on: January 15, 2013, 06:03:30 AM »
Is your S.O. able to carry the basic bills while you figure things out career-wise?  If so, you have more flexibility.  What I would do (with him/her  in conversation of course) is calculate out what you would need over and above his or her contributions to the collective pot for the length of time you anticipate being "in transition" and then some for the various emergencies that come up. If you anticipate having to move, a cash fund becomes more important as you can't be taking it out of your house and there's all this need for short-term cash options.   I think actually working through the details of your plan is better than just saying "6 months salary in cash" because working through that plan often gives you insights for actions you hadn't thought about. Not that all will go according to plan, but in line with the the old Eisenhower quote "Plans are worthless, but planning is everything."

SwordGuy

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Re: Liquidity and job security question
« Reply #3 on: January 15, 2013, 09:44:35 AM »
I would start looking for a new job now and build up some cash reserves for the worst case scenario. 

In addition, you can always take the job out of town and rent someplace really cheap there for the one to twelve months it takes you to find a job back home.  If it's close enough you can go home every weekend or so.  Not an ideal way to live but it does keep you from drawing down cash reserves while you look for a new job in your home town.

jba302

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Re: Liquidity and job security question
« Reply #4 on: January 16, 2013, 10:39:58 AM »

I am currently debating increasing our cash savings. My employment situation has become less stable, with my current employer downsizing our branch location and implementing a new strategic plan that undoubtably will lead to my position moving to a different location. To make the story short, a move for this job is not likely something we would be willing to do. So that leaves me in uncertain waters and thinking about how to play this safe financially. We do not currently have any invested assests outside of retirement accounts and with the reality of a job change now looking me in the face I am not sure I can take what cash we have and put it in the market without some potential heartburn (face-punch for being a wuss?) So, the idea being to increase our cash safety net.

Other details that may or may not matter:
My career field is not common or very easily transferable, meaning it will take me some time to find other opportunities.
We are both contributing to pre and post tax retirement accounts.
I was thinking of increasing cash to equal six months of my salary.
The job change is not likely to happen in the next six months, but I don't know when.

As always, I look forward to your insights. Hopefully I have provided enough information.

Wow, I'm in virtually the exact same position as you. I have no idea what the stability of my current position will be in a few months, and the alternate opportunities that are currently avaialble are going to result in a rather large income reduction, which will be only partially offset by better benefits.

I'm learning more towards stability, knowing that my specific job set is easily transferrable but the openings are generally slim (very few of these positions per corporation). If I wait, I will either be fine or be fighting a small group of people for jobs.

SunshineGirl

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Re: Liquidity and job security question
« Reply #5 on: January 16, 2013, 11:03:44 AM »
I think you'd be very wise to build up 6-12 months of living expenses (vs. salary). Liquidity is very important, and it will partially relieve your stress. Also, definitely be proactive about finding a new job.

sheepstache

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Re: Liquidity and job security question
« Reply #6 on: January 16, 2013, 12:17:26 PM »
Yeah, I'm not tempted to facepunch here.  Agree with some things others have said.  Personally I would: 1. Start researching new work now, put out feelers to colleagues and businesses, etc.  Possibly you can even find a better deal than you have now.  2. Have six months bare-bones expenses (not salary) in cash (and as Twinge points out this is only your contributions to the household, not the entire household budget)--with the understanding this will actually last longer than 6 months if you are eligible for unemployment but personally I am one of those types who likes the emergency fund for FU situations too and you don't get unemployment for those :) If I got unemployment checks I would probably contribute them to my IRA as they came in.  3. Look into HELOC options so the line of credit is already set up when you need it.  4. I would probably grab a 0% intro APR credit card once I became unemployed to keep earning interest on whatever the cash savings are.  5. If unemployment went on for a really long time and I had a 401K I wanted to roll over to a Roth, I'd do it that year.  6. If unemployment went on for a reeeally long time, I'd a) switch to a new career or b) say fuck it and hike the appalachian trail like I've been wanting to.

And do you feel comfortable with your boss to talk about this?  Like, the fact that you wouldn't want to move?  Or maybe as the time got closer to when you would become unemployed you could interest them in your doing some part-time consulting work for them?  Are there any skills or certifications you could work on now to influence either of these options?

You could also gain a little bit more by doing a CD-ladder.  A lot of CDs will still let you withdraw the money just with a penalty fee (usually 3-months interest so if you didn't lose your job in the next 3 months you at least wouldn't have lost any principal).

I think it would help us to know more about your spouse's situation.  Is their career field more flexible?  Would they have the option to take on more work during your search?

rugorak

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Re: Liquidity and job security question
« Reply #7 on: January 16, 2013, 01:11:10 PM »
I keep about 3 months living expenses in a worst case scenerio, 6 months in all probability. And I have no worries about my job. Until I am living off of investments or other forms of passive income I will keep it there. With the higher probability in your future of losing your job you would be very wise to put away a bunch of cash until your situation improves.

For the most part I agree with everyone else. I prefer to keep things as simple as possible so I would save as much as I could and pursue anything related to a new job. If you haven't been looking you may even find something beforehand that is better than what you have anyway and be able to avoid the time without a job all together.

NWstubble

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Re: Liquidity and job security question
« Reply #8 on: January 16, 2013, 09:27:10 PM »
I think you'd be very wise to build up 6-12 months of living expenses (vs. salary). Liquidity is very important, and it will partially relieve your stress. Also, definitely be proactive about finding a new job.

I think a few others have mentioned this as well and I realize now I should have explained why salary vs. expenses. We are currently saving about 50% of our income, our salaries are relatively close, but my wife brings in more than I do (thus one of the reasons we are reluctant to relocate). I think I stated salary because we could cover our living expenses with my wife's salary, especially if we went into unemployed mode and didn't buy anything unless absolutely necessary. My reasoning being that the money set aside would be for emergencies that came up during unemployment (big and small, ie house repair) rather than day to day expenses, since our cash flow would no longer be able to cover the unexpected.  For some reason at the time of writing, salary vs. expenses seemed to make sense. Now, not so much.

I think actually working through the details of your plan is better than just saying "6 months salary in cash" because working through that plan often gives you insights for actions you hadn't thought about. Not that all will go according to plan, but in line with the the old Eisenhower quote "Plans are worthless, but planning is everything."

Excellent advice, thank you. This is what we will be doing. Now, on to step one...make a plan. Also, +1 for the quote.

NWstubble

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Re: Liquidity and job security question
« Reply #9 on: January 16, 2013, 09:54:42 PM »
Thank you all for the feedback and advice. I am currently looking for opportunities. Since my field is narrow, I have learned to start looking early. In truth I never stop looking, just change the frequency at which I check what's out there.

or b) say fuck it and hike the appalachian trail like I've been wanting to.

If my wife finds this quote she is going to hunt you down for encouraging me, lol.

And do you feel comfortable with your boss to talk about this?  Like, the fact that you wouldn't want to move?  Or maybe as the time got closer to when you would become unemployed you could interest them in your doing some part-time consulting work for them?
Backstory: they made me a move offer two years ago, which I turned down when they wouldn't negotiate on salary (moving to a high cost of living area). At that time we were sitting on a pile of cash we had saved for a downpayment on a home so it was much easier to swallow the idea of lengthy unemployment. Same reasons still apply why we are reluctant to move, plus the purchase of a home doesn't help their case. So, the boss knows moving is not likely. I have considered the potential for consulting and I think it is actually pretty good, but don't want to count on it coming through, you know planning for the worst and all.

savingtofreedom

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Re: Liquidity and job security question
« Reply #10 on: January 16, 2013, 10:47:57 PM »
I think I am in a similar situation.  Your plan sounds like a smart one to me.  I am concerned my employment will be disappearing by mid-year - too bad I don't posses that optimism gun - I may be over analyzing the situation but all I hear about are budget cuts.  I have told my husband I am taking a break after that - we will see how that goes :).  But yes, having some more liquidity is a pretty smart move in my book.  We have been working towards that and should give us some flexibility if my job goes away. 

Good luck!