Continuing with the idea I started last week, gleaning insight from some of my client interactions here’s Ryan’s Story (again not his real name).
Ryan is a work from home, computer support technician for a multinational corporation. His job is to log in to various computer systems and perform diagnostics and maintenance. Due to the nature of the industry he can do that from anywhere with a computer and an internet connection, thus he works from home. What I don’t know about computers could full a room so that’s about as much as I can coherently articulate about Ryan’s job.
A couple of weeks ago Ryan found out that the company he works for has lost the contract to service one of their biggest clients. Therefore, at the end of March Ryan’s services will no longer be required and he will be out of a job. After the dust settled and Ryan started to face reality, he called me in to do a review of his financial situation.
I won’t go into a lot of detail here, but the bottom line is, if he doesn’t find a new job within a month or two, Ryan is screwed. After doing full review, taking a look at savings, pensions, debt etc, I told him as much. But then we got down to business.
Coincidentally the January/ February issue of Forum, the member publication of The Financial Advisors Association of Canada (ADVOCIS), carried a cover story on this very topic. Freelance writer Deanne Gage interviewed a number of financial advisors all over the country about how they council clients facing a job loss. One of her interviewees was Dr. Roberta Neault, president of Life Strategies Ltd. In Aldergrove, B.C.
“It’s not a great time to be making big decisions”, says Neault, noting that a client who has just lost her job should take some time – even just a few days or a week – to think through all their options. [Gage, Deanne. (2014 January/February). Suddenly Jobless. Forum p. 10.]
When I met with Ryan he was still in shock. He wanted to cash out his pension, stop contributing to his RRSP and take out a line of credit on the house, all bad ideas for a 49 year old with 16 years left before retirement. Ryan needs cash, no doubt but to close all of his long term savings accounts at once he would be taking a huge tax hit and would actually end up with more money than he needs, especially if he were to find a new job fairly quickly.
Elsewhere in the article Gage reminded her readers of the importance of having an emergency fund.
Setting up an emergency fund at this juncture is key. Clients could us part of the severance towards one, and set up a line of credit through their financial institution. [Gage, Deanne. (2014 January/ February). Suddenly Jobless. Forum p. 12.]
Now I’m not going to say that it is ever a good idea to go into debt, especially when you are facing an uncertain future brought about by a job loss but the idea of setting up an emergency fund is very solid. In fact, if you’ve waited until faced with an imminent change in your lifestyle to set one up it’s probably already too late. Using part of your severance to do it now it a great idea though, that and staying as far away as possible from additional debt would be my advice.
In the end Ryan decided to pull a small amount of money from one of his longer term savings accounts to live off of for a couple of months with the hope that he will be able to find work relatively quickly. Computer technicians with his particular expertise are in demand so he shouldn’t have too much trouble. If things drag on for more than 2 or 3 months we can always revisit that plan. We will also likely move his pension money out of the company sponsored plan and into something he can manage on his own but not until he is officially let go, who knows, maybe his employer will land another big account and he will be asked to stay on.
The next few months are going to be uncertain times for Ryan and his family. I’m glad he is thinking long term and taking things slow, even if he was a bit panicked when he first called me. Sometimes a little distance is all it takes to gain perspective. I think Ryan will be okay, but if he’s not I’ll be there to help him in any way I can.
For more information on managing through a job loss or other financial transition, or for information on Meekonomist approved methods for getting out of debt and saving an emergency fund write to email@example.com