My Finances 5 Months After Being Laid Off

As most of you know, I was laid off a little over 5 months ago back in October of 2008 (see 11 Things To Do Immediately When You Get Laid Off).  I immediately sold off most of my taxable mutual funds to shore up my emergency reserves, as I had no idea how long I would be without a job.  After what seemed like much longer than 3 months of unemployment, I finally started a new job about 2 months ago at the beginning of February.

It goes without saying my jobless stint wreaked havoc on my finances.  I started with what I thought was a decent emergency fund, owned several funds in a taxable account for various purposes (retirement, new car, etc), and held a good number of individual stocks (most of which I held onto).  I received a relatively generous severance package, but still had to dip into savings more than I would have liked.

It’s somewhat of a surprise, then, to find myself in the current situation just two months after starting work again.  Here’s a comparison of my finances before and after the lay-off.

Before The Lay-Off

• Emergency Fund – 6 months expenses
• New Car Fund - approximately $2500 invested in Vanguard STAR Fund (5-7 year time horizon)
• Taxable Retirement Funds - about the same as in my emergency fund

Today

• Emergency Fund - 12 months expenses
• New Car Fund – $0, transferred to emergency fund
• Taxable Retirement Funds - $0, transferred to emergency fund (my IRAs and 401k are still intact, so I have plenty of retirement savings)

As I revealed in yesterday’s post about my tax refund this year, I lost quite a bit of money in my taxable accounts before selling them off to shore up my reserves.  However, even after those losses and three months of unemployment, I now have slightly more than double the cash reserves on hand as I did to begin with.  The reason?  Frugal living, obsessive saving these last two months at a higher-paying job, good planning, and my pending tax refund have all combined to help me quickly regain my financial footing.  At the end of April, I plan to top off my emergency fund and resume contributing to my Roth IRA (I missed a few months while unemployed), 401k (I’m not eligible at work until after 90 days employment), and taxable retirement funds.  By the end of the year, I anticipate saving over $10,000 for retirement, which is less than I would have liked but still far more than I would have expected after losing my job.  I could save more, but I decided that replenishing my emergency fund should get top priority.

This only goes to show that losing your job isn’t the end of the world if you’re prepared, keep a level head, and lead a frugal lifestyle.  If you’re living paycheck to paycheck, on the other hand, you’re in for a rough ride.