The Mean Elephant, Part 2

I was planning on writing several blog posts about job loss today, but I think I'm going to tie this topic up quickly. One more blog post and then I'm done. 

The first week after we learned about Steve's downsizing was a blur. Steve had no time to process the news, because he had to go into job-finding mode immediately. Resume writing, creating a LinkedIn page, talking with headhunters. He had to buy a new tie. He started interviewing for new positions within the week. He was still in major shock, but he didn't had time to digest events, which was probably a good thing. 

In between all those tasks, I kept Steve busy. We went for long walks and tried out the lunch specials in town for the first time. 

I evaluated my own situation. Should I start looking for a job, also? Freelance writing is great, but it isn't paying the bills so far. Should I run out and get a minimum wage job right away or put in the time to get a proper job? We decided to wait until the situation got more desperate. Steve was speed-dating on the interview circuit and we would have run into major childcare problems, if I was doing the same. With my background, even a proper job might not cover our child care expenses.  

And, of course, I decided almost immediately to keep a record of events with the idea that I could turn the bad news into an article. How could I monitize this disaster? So I started a secret blog, called Downsizing Diaries, to keep notes. And then I googled "Downsizing Diaries." Do you know how many blogs are called "Downsizing Diaries?" A lot. And they all end with home foreclosures. Honestly, I felt like an ass for thinking we were special in some way. 

Still, home foreclosure was very much on our mind. As former graduate students, we're cheap as hell. I don't have a landscaper or housecleaner. We drive crappy cars. We have no credit card debt. But like everybody else here on the East coast, we're house poor. Almost all of our money goes to the mortgage and property tax. 

Our money is divided up in three ways: liquid, stock investments, and 401K money. We decided that we could burn through the liquid and stock money, but we would sell the house before we had to hit the 401K money and way before we were in serious hot water. We figured that we had six months. I like our house, but an apartment would be fine, too. 

And burn through the money we did. When you're unemployed, your expenses actually go up. We had to pay two months of COBRA up front, which was $4,000. Steve needed a car to get to some interviews, and so our rarely used second car had to get serviced. My parents helped out with that $2,000 bill. I started evaluating our grocery bill carefully. We stopped going to out for dinner. I didn't visit the mall. 

In week two of this insanity, Hurricane Sandy happened. New York City and the area was shut down for two weeks. Interviews were cancelled; positions mysteriously dried up. Nothing happened for two weeks. Thanksgiving and the winter holidays happened. Again, days when nobody is calling you for interviews. And Christmas is expensive. We cut waaaaay back, but it's still expensive. How about a panic attack while wrapping Santa's gifts on December 24th? 

The most asked question during this fiasco was "what did you tell the kids?" We didn't tell the kids. In fact, as an experiment, we waited to see how long it would take them to notice that daddy was there in the morning and in the afternoon. It took my Einstein children two days before they noticed. Then we told them that Steve's office was being painted, so he was working from home for a little while. They bought it. Well, I think Jonah figured things out eventually, when he overheard a conversation. We didn't want them to worry about matters. 

Steve started working the week after Christmas. It took a couple of months to recover emotionally and financially. Not that we're back to 100 percent in either way, but things are certainly better. I think we would both like to figure out a way to cut back on our expenses even more and stockpile a year's worth of savings. But we can't do that without selling the house and that can't happen until the kids are done with school. So, we're squirreling away money here and there and keeping things simple. 

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29 thoughts on “The Mean Elephant, Part 2

  1. I’m really glad for the happy ending.
    “We had to pay two months of COBRA up front, which was $4,000.”
    This is one of the things I really appreciate about being Canadian. The last thing you want to be worrying about at that time is a huge insurance bill.

  2. I got laid off in 2010. It was an incredibly hard experience, although frankly in the end it was the best. That said, I would never wish it on anyone else, and I’m glad to hear Steve landed safely elsewhere.
    One thing my bout with unemployment did for me was make me totally manic about having money in savings, something that’s very very hard to achieve these days. I’m not sure I’ll ever have enough money in savings to truly make me feel secure.

  3. Wow. So glad to hear that Steve ended up working again. And I had no idea that COBRA needed paying up front like that. Talk about a system making a hard time even harder.

  4. I’ve been so lucky with my steady pay-cheque and, I think, that we settled here in Canada instead of down in the states. That said, we paid the price with Mike’s employment prospects – to hang onto my great job, he’s had to be utterly flexible and, as a result, is sadly underemployed.
    We’ve always been dead honest about money and work with our kids, though. Maybe not the full picture about our cash flow but I felt I was raised really “in the dark” about money and I didn’t like the steep learning curve of independence!
    I wanted my kids to have a sense of how to plan ahead for expenses and how we make tough choices. Eldest is now holding down two part-time jobs, saving madly so she will have textbook and spending money at university in the fall. She credits this drive to our family talks about what money we have and where it will go.

  5. “Do you know how many blogs are called “Downsizing Diaries?” A lot. And they all end with home foreclosures. ”
    that’s just about heartbreaking..
    glad you have semi-recovered..
    I remember the shock of my first layoff, my mother couldn’t understand it, thought I must have done something wrong. Luckily my wife was working and I was still young and cheap, so found a new job easily. It would be a lot harder now. I drive a 98 minivan with a quarter-million miles on it, and wear my clothes until they disintegrate, in order to have a large cash position between us and the gutter..

  6. “One thing my bout with unemployment did for me was make me totally manic about having money in savings, something that’s very very hard to achieve these days. I’m not sure I’ll ever have enough money in savings to truly make me feel secure.”
    I think that’s one of the toughest lessons of the new short-term economy, the individual risk. All of these stories (Jen, Pesto, Steve, and our family’s, too) end OK, maybe even well, in the sense that employers were getting an advantage out of the employee’s quest for security, that the employee was able to sell on the open market when security was taken off the table (though not everyone’s story ends like that).
    But it does leave you feeling insecure, if you’re not a risktaker.
    I do have a number, though, of the amount of money that would make me feel secure: 10 million, in semi-liquid assets (i.e. not real estate or non-liquid invested capital, like in a small business).

  7. Did you think about listing the house before getting in serious mortgage/money trouble? If it can take six months to sell/close/move, you need to be well down that path before the money trouble hits. (Me, I’d cash in the 401(k), but I’m in the midwest, where house prices aren’t crazy.)

  8. I’ll point out that this is one of the values that folks with “secure” employment need to be pro-rating into their pay (where secure means very difficult to lay off, tenure, and the forms of security that sometimes come with union/government jobs).
    A guaranteed income stream of 50K, I value that at about 2.5 million, and 100K at 5 million.

  9. My dad lost his job when I was a kid – I think I must have been around 8 or 9. I don’t remember it having a huge lifestyle impact mostly because we lived pretty frugally already.
    It was much much easier then – family of four supported by one blue collar salary. And they owned their home too.
    But what I DO remember is my dad coming home early one day, white as a sheet. Those were the days when you had one employer for life and I don’t think he every got over what I can only imagine what felt like to him as a huge betrayal.
    He did get another job a few months later and it was the one he retired from. It was a private business and he ended up being the owner’s right hand guy and being almost a consigliere for the son when he took over.
    They did right by him – he’s 80 and still gets an annual bonus for consulting on different contracts.
    This for a guy who left school at 14 to apprentice as a machinist when HIS dad died. He had to leave school to start earning a living to help support his mom and siblings.

  10. bj, can you give more detail about what you mean in terms of valuing a guaranteed annual income of $50K at $2.5M? Meaning, you would only take a job that pulled you away from your guaranteed annual income if it tipped the scales at that number? And do you mean, that number in cold hard cash (like a lotto payout)?

  11. “They did right by him – he’s 80 and still gets an annual bonus for consulting on different contracts.”
    I’ve said this before in different ways (and it’s hard to say without being condescending or offensive), but I think there are a number of us who would be able to capture the value we loose with security, if we could just accept the psychological risk. That is, folks who have “madd skillz” and could find jobs in different places where they would be highly valued, but try to fit themselves where they are instead because they are risk averse. I’m trying to teach my kids to be more entrepreneurial, though it is a skill that does not come naturally to anyone in my fmaily, because I think it’s going to be a hugely important skill in the new economies.

  12. ” And do you mean, that number in cold hard cash (like a lotto payout)? ”
    I’m kind of joking, because my calculation is lazy. I divided the income stream by 2% to get the number, assuming a 2% rate of return on the cold hard cash.
    I know that the 5 million isn’t equal to an income stream of 100K, in either direction (5 million can be lost somehow, if it’s not kept in cash under the bed, and even then, the 100K job can come with benefits ). While, on the the other hand the 100K job only lasts as long as the person does (and can’t be inherited), and doesn’t buy that much.
    But, I do kind of think that having life time tenure in a 100K job is kind of like having 5 million in a trust fund. I remember thinking through this calculation when people were talking about Sotomayer’s savings (low). As a federal judge, she (like all federal judges) has life time tenure, which means she doesn’t have to save for retirement or job loss contingencies. That “trust fund” value is part of the answer when federal judges complain about being underpaid. Yes, some of them could make a million in a law firm, but, a federal judge, on being appointed, is being given a 5M+ life trust, too, while the partner at the firm is just making 1M.

  13. My husband was laid off 4 years ago. It took him 2 years to find a job–and it’s part time at half the pay and no benefits. We sold the house and now rent an apartment. We banked some money from the house sale (we were not underwater), but then had unexpected horrid medical bills (just one example: my husband had a bowel perforation) eat up all the savings. We still have our 401ks which are almost back to as much as they were before the 1999 market drop, oh boy, and we have no other debt (paid it with the house sale). But I doubt we’ll ever own a home again (rents are too high to save a downpayment now that the savings went for medical bills).
    There is too much random shit or what some people call luck in the world for there to be any completely safe plan for a future.

  14. We were without insurance as we transitioned from one job to the next, with two new kids and a 3 month wait period at the new job to get on insurance. We got all of our check-ups before our old health insurance expired and then held our breath. Because as it turns out, you have to pay COBRA in a lump sum, but not up front. You have until three months after your termination to make that payment. I think that’s the law, but not positive. We calculated it out and we had 1 day where our COBRA pay-in option ran out before our new insurance kicked in – we didn’t leave the house that day. The situation was probably different for you as it sounds like you use your insurance regularly, so that probably wasn’t an option. But I remember sweating bullets for those three months, sick with worry that we were going to have to bite the bullet and pay for COBRA. No one should have to be in that position.

  15. OMG, it must have been very hard to keep mum about it in the blog (no wonder you began a secret blog). Or maybe it was very easy because you simply couldn’t write the posts… I’m glad Steve was able to get a new job after 6 weeks, but I imagine it must have been really scary!
    I don’t know if you’ve been reading my blog, but the same thing happened to us in 2007, the main difference was that the whole thing took nearly two years to unravel and get slightly “solved” and I blogged most of it, except some of the regret that I blogged later (in 2009 after things had calmed down) and which brought me a horrible troll in the shape of anonymous blog comments.
    (of course if you’ve read you’ll know it all already, but here’s a summary, also for the benefit of your readers, should they care to read about my family)
    K lost his Big Pharma job on October 31st 2007 a month after staring (but it would be a couple of months before he would be officially terminated). We had just bought a fixer upper with a 2.3K mortgage per month. He was rehired on our 13th wedding anniversary (Dec. 18), but it was a temporary position and the job wasn’t a good fit, so in August 2008 he decided to walk away and start a second postdoc at Penn, with a paycut of more than a 50%.
    We used all of his severance package to renovate the entire house and pay the mortgage. He added me to his university sponsored health insurance and the boys went on the partly subsidized State plan (which after a year was wholly subsidized since our income decreased). I began working part-time at my son’s small church school with disastrous consequences and I later cyber-schooled for a year.
    In March 2009 we realized we would run out of money soon and put the house on the market, but it didn’t sell. We might have had to start the foreclosure process if we hadn’t been approved for a renegotiation as part of Obama’s bailout. Phew!
    In 2010 when K got his current faculty position we sold the house and moved. I still don’t like to look at photos of our extensive house renovations (and you know I’ve always LOVED to see yours).

  16. As a Canadian one thing that seems to never come up in the US discussions around health care is labor mobility.
    I can move fairly freely from job to job. I don’t consider health insurance when considering a job offer. I can quit a job and know that I will not lose my retirement funds due to a perforated bowel!
    It seems to me that the US system of health care is an impediment to true “free market” labor mobility. In a weird way, true universal healthcare helps economies and labor markets function.

  17. I admit I’m a little relieved to hear this, and that it turned out sort of ok. When you wrote those posts I was thinking medical problems.

  18. I think it’s truly impossible to properly protect yourself completly in life. Shit happens. I was just talking with a woman tonight who had an employee at her business who embezzled all her money and she had to declare bankrupsy. You can’t anticipate every negative thing that will happen. The trick in life is handle adversity with grace and then move on.

  19. Laura said:
    “But like everybody else here on the East coast, we’re house poor. Almost all of our money goes to the mortgage and property tax.”
    Some of our relatives are currently considering a $2 million fixer-upper in British Columbia.
    Real estate is funny.
    “Steve started working the week after Christmas. It took a couple of months to recover emotionally and financially.”
    Very good!
    Janice said:
    “We’ve always been dead honest about money and work with our kids, though. Maybe not the full picture about our cash flow but I felt I was raised really “in the dark” about money and I didn’t like the steep learning curve of independence!”
    I had really no idea how much things cost when I was a kid, but I definitely knew when my dad was on unemployment. As far as we kids were concerned, it wasn’t a huge apocalyptic event, because it happened fairly regularly. I was kind of bummed out between getting out of grad school and finding gainful employment (especially when I found that I couldn’t get a job at Einstein’s Bagels), but it was probably helpful that I knew that jobs come and go, and that not having one is not the end of the world.

  20. My wife and I are echo babies for the Depression. All four of our parents were born between ’15 and ’22, so they grew up during the Depression. This led to their modelling thrift! for us, and when my Dad spent a dollar, you could hear George Washington squeal. It has had a lasting effect on both of us: when my wife got a swell job in a law firm, we kept the house I had bought as a middling civil servant, and several years later when they ‘right-sized’, and the right size was, not continuing to employ her, it was wonderful that we had not ramped up our expenses beyond what we could deal with on my salary. We spend a great deal less than most of our friends with similar incomes, because timid.
    She went out on her own, some years have been swell and some have been medium. A big part of the business plan has been ‘husband with benefits’. COBRA would have been a HUGE problem. And even COBRA would do nothing for periodontal disease.
    Obamacare seems a real kludge in a lot of ways (‘you have to pass it to find out what’s in it’ – well, it was passed, and now we are finding out) and I think it was an enormous lost opportunity. It does not look like it solves the lost-health-maintenance problem for people who lose their jobs.

  21. bj said:
    “I’m trying to teach my kids to be more entrepreneurial, though it is a skill that does not come naturally to anyone in my fmaily, because I think it’s going to be a hugely important skill in the new economies.”
    I make a point of telling the kids when extra money comes in (software royalty checks, article reprint fees, etc.), how much came in, and explaining how the money was earned. I hedge a bit when our middle child asks how much his dad makes at his day job, but I’ve given him the range for what professors make.
    I try to make sure that the kids know what things cost, and after we buy our house, I’m thinking about doing a mortgage countdown thing to visually show how we are doing with paying off our house debt.
    Kai Jones said:
    “There is too much random shit or what some people call luck in the world for there to be any completely safe plan for a future.”
    My husband’s family lost a factory near Moscow to the Bolsheviks right after the Russian Revolution. That must have been quite a shock.

  22. Oh, and when we’re getting to the end of the month and the money allotted for the month is running out fast, I do tell the kids that if they want to go out to dinner. They get that. However, now that my oldest is getting a bit more sophisticated, she has been known to point out to me that in that case, maybe I shouldn’t have gone to the alternative coffee place for an iced latte.

  23. My husband’s getting furloughed with the sequester and when I found out, I got absolutely FANATIC about picking up additional consulting gigs and the like. I do various types of curriculum evaluation and boring statistical stuff having to do with standardized tests, but I’ve gotten crazy about feeling like you should never turn down additional work in this economy. Travel for work? Heck yeah. Teach an extra course oer the summer? Heck yeah.
    I too was concerned that the issues you weren’t talking bout were medical, but I can’t imagine how scary something like a layoff could be. Glad it didn’t drag on too long for you guys. I would NOT have been able to hide it from my kids, though.
    We’ve also gotten crazy about saving and having months worth of living expenses squirreled away. We’ve been watching the government lay off contractors in our area for far too long and watched neighbors make really difficult choices. (The common one where we live seems to be dad takes a tour to Iraq to save more money, or he moves away to DC, leaving his family at home in the house they can’t sell.) My fervent prayer is that we can all stay together in the same city until the kids finish high school. We need both incomes and so even if he neeed to find a new job, I would have to stay put. Scary times.

  24. Wow. I have a close friend whose husband just lost his job as a lawyer. They’re selling their house, renting an apartment temporarily, and looking for a cheaper house. She is handling all of it with amazing grace, even though I’m certain she’s terrified nothing will work out.
    Although we suck at saving (not always true, but has been for the last 5 years), I do come up with contingency plans. They involve selling the house, renting, and hopefully, finding a new job. Mr. Geeky has tenure, which helps. I know that job is always there. My job is less stable, technically, but I figure they won’t fire me while my daughter is still matriculating at my school. So I’ve got 4 years.
    I am working on the saving thing again, though. It was one of my New Year’s resolutions to get our spending under control. We’ve been pretty good so far. We have too much credit card debt, which I’m working on. A job loss for us would be truly devastating, I think. I’m glad yours turned out okay in the end.

  25. I’m sorry to hear about the job loss, and I’m glad to hear it had a relatively good outcome. My sister lost her job last year right after she had signed the papers on an apartment, but right before the mortgage had come through. Although she found a new job less than three weeks later, the sellers had pulled out and sold the house house to someone else. She’s found a new place and was extremely lucky to get a new job so quickly, but it was incredibly poor timing.
    I feel kind of ambivalent towards the idea that one should accept higher risk to maximize financial rewards. There are other rewards in life, like psychological peace of mind, which I think might be worth maximizing. I am dispositionally a non-risk taker, and while I do have to deal with risk (I invest money, am a grad student), I would choose to be poorer but have a financially secure position over a higher paid job with less security, even if in the LT I knew I would be permanently crippling my earnings. I also agree that universal healthcare would vastly improve the job situation. It’s hard enough worrying about paying for food and shelter without worrying that a health problem might leave you homeless. When I feel sick, my first thought is never about my health and always about how expensive my illness might be, or what the cost/benefit analysis of seeing a doctor is.

  26. “I would choose to be poorer but have a financially secure position over a higher paid job with less security, even if in the LT I knew I would be permanently crippling my earnings”
    I think there are a lot of people who feel this way and are finding the current economic environment difficult, because I think the jobs where one can choose security over better earnings are being undermined and eliminated over time.
    Weak labor definitely contributes (in the form of people being unwilling, or legally unable to bond together to increase their power, in the globalization of labor availability, and the general availability of labor skills); These forces, makes it risky, in turn, for an employer to commit to a particular labor pool, because they have little flexibility when faced with economic turmoil.
    That brings me back to what the monetary value of “security” is in the current labor market. It’s worth a lot, and it’s to be expected that there’s going to be enormous pressure on wages and availability of jobs with significant legally enforceable security. So, in practical terms, continued pressure on the tenure-track position market. I think that’s where part of the disenchantment lies — that many, say, entering the labor market are willing to give up significant income (and think they’re giving up significant income, in the form of becoming lawyers or doctors or investment bankers) in return for the security of the career trajectory (if one gets tenure). But, legal/banking careers are highly unstable now (and, they’re the parallel to the non-STEM PhD, not medicine, for most). It’s evening the monetary value of the different tracks to the point where an academic shouldn’t think they’ve traded much income (which, in turn, makes the jobs rare, since they aren’t paying low enough to equalize the risk of job loss in higher paid fields).

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