by Adam Dawson
When you read the Internet experts on what to do when you get fired, most of them say that you should try to learn from the experience. You’re never totally blameless and you need to be able to demonstrate progress in your professional growth. Here are some personal lessons I’m learning from this experience, not to mention the professional ones I’ll continue to reflect on.
1. We need a bigger emergency fund.
For most of the last 3.5 years, we had the recommended $1000 emergency fund in the bank. Had my job search not worked out so quickly, we would be seriously hurting with no more money than this in the bank. We must begin to build our emergency fund even while we’re paying off debt. Our preliminary plan is$5000. Once we’re there we can see about increasing it.
2. You can often see it coming – and prepare.
I saw signs of this event all the way back in the April/May timeframe. My project list began to dwindle and I received some harsh criticism from my boss. Then he stopped responding to emails despite my efforts to improve the situation. Although I started my job search right away, in hindsight, I did very little to prepare financially for the worse case scenario. We didn’t cut back or save more in preparation. This was a dumb thing to do. We are lucky to escape unscathed.
3. I must keep up with my ADD medications.
8 years ago, I was diagnosed with adult ADD. I am sometimes skeptical of the whole Adult ADD idea and don’t intend to start a debate here. But I did find that medication helped me focus and increase my productivity at work. In my recent job, I did not take medication, mostly because I don’t like the side effects – it makes me grouchy. But it’s clear to me that I need to be treated in one way or another, as my productivity was an issue.
So those are 3 lessons I learned. There are more but if I can get these down we will have made progress!
Hey Adam! I think your lessons learned are all good and valuable points. A big EF is a good thing. Trust me on this one.
I also admire the way you look both sides of the equation and not putting the blame on poor chemistry between you and your boss.
It is good thing that you were able to find something pretty fast and from now on it is onwards and upwards! Best of Luck!
I know there are different schools of thought on the EF – pay off debt before making a sizable EF or get a stable EF and then attack debt. Everyone is different and not everyone has the same variables – but for me, it was important to first get a few months worth of savings before I went crazy on my debt. Normal expenses like new tires or new snow shoes that didn’t have holes in them were always a freaking emergency because I never had any savings.
Hi Adam,
With regards to the ADD problem, medication isn’t always the answer. I took medications for my ADD for most of my teenage years but what I learnt was that it is up to you to decide to focus, not just rely on medicine to bring it on. Now I’m an adult and off my medication, I have just finished a degree and can advise that what got me through whilst working full time and studying part time was keeping up a strict regiment of exercise, healthy food, regular meals and early nights. They bring you to your optimum self where you are in a good position to feel like you want to concentrate and be efficient. Perhaps you could be your best without being medicated is what I’m suggesting.
Good luck with it all and enjoy your new job!
I’m blessed with working for myself so no-one except my husband (and business partner) knows how unfocused I am. I can hyper-focus when faced with a deadline but life is tiring going from deadline to deadline and sometimes it gets in the way and you miss deadlines badly. That’s been happening with financial deadlines this year because I’ve been sick a lot and then being distracted and overwhelmed when I’m home from the hospital.
In theory, I’m well now, so I need to buckle down. I’ll try and remember your prescription and work it. I note it is 10:23 p.m. and so I shall head to bed immediately. Since physio is between me and lights out, I won’t be getting to bed early but I will be getting there earlier than I would have if I had not read your post. Thanks!
You just described me to a “T”.
What helps me a lot is doing time audits every few weeks.
Like now, why am I reading this blog? LOL
Props to you for the self analysis. That’s never an easy thing to do and even harder if you’ve just been let go from your job.
A good-sized emergency fund definitely helps with everything, and most importantly helps keep overall stress levels down. One thing which I don’t think has ever been discussed is what interest rates on the loans we are actually talking about here. The balance between how much you are actually paying in interest vs principal can influence how you build and maintain that emergency fund. For instance, I personally am of the school of thought that any emergency fund should be continually built up even past a set goal amount (obviously you can taper any contributions) just because inevitably you WILL have to dip into those funds. So having a line item in your budget for that contribution is a good way to go.
We have a very healthy emergency fund, but I still add to it every month and then over time morph the “extra” into other longer-term, inevitable needs, like cars and knocking out lump-sum insurance payments (auto, home, etc.) at the beginning of each year. Even though I’ve surely missed out on financial gains given the blazing stock market over the last couple years, this conservative, proactive approach to saving has let me focus on enjoying life without being stressed out about maximizing the value of every dollar.
Even without all the info, 5k does seem like a nice, round number that should cover a wide range of scenarios. And not disproportionately large given some of the factors we’ve already heard about (e.g. home repairs, substantial car usage, etc.).
I love this advice. Do you use a percentage of overall income to keep
adding to your savings?
We don’t use a set percentage for this purpose. Normally what happens is that we have certain savings goals that we prioritize (e.g. vacation, college fund) and what’s left after we pay all the bills gets “swept” into the emergency fund.
You may ask what’s the difference between a dollar saved for vacation vs. a dollar in the emergency fund. Mathematically, zero. But psychologically, it seems different, and feels empowering. And that, to me, is the best reason to be out of debt: you feel empowered choosing exactly how you want every dollar spent!
That analysis of your job situation was very balanced, Adam. Nicely done.
I understand about your emergency fund. This month my roommate died unexpectedly. I don’t have an emergency fun, and I’ve only got a part-time job. November is the last month for which I have the rent. Without a full-time job and a new roommate, I’ll be evicted in December.
Emergency funds are crucial…!
Oh my goodness, Lara, that must be very upsetting! Even if you weren’t close to your roommate that’s still a pretty big shock to go through.
Adam, I think you guys should make boosting that emergency fund your first priority. I would stop any extra beyond the minimums until you build that fund to $5,000. Beyond that, I’d set aside an amount every month that goes straight to savings and continue to build it slowly.
Since you have a 20 year term on these student loans and you’ve indicated that paying it off in 7 is above and beyond what you really need to be doing, I’d take a step back from it immediately. Sure, it’s great to pay it off early, but if you aren’t paying yourself first and preparing for that worse case scenario, what difference will it really make if you’ve knocked the SLs down to $50,000 but you’ve had to run credit cards up to $20,000 to cover emergencies?
I think the amount you’ve already paid these down is awesome, but I’m a little shocked to hear you only have $1,000 in savings. I don’t subscribe to Dave Ramsey’s idea that this amount is most of the time sufficient. Not when you own several properties and definitely not when you’ve had job uncertainty.
We experience constant job uncertainty with the nature of my husband’s work as a gov’t contractor. Just barely escaped going without pay during this last shutdown and probably facing it again soon. For that reason, we’ve built our emergency savings to 18 months and backed off the mortgage pay down. It’s totally throwing off our schedule, but what good is paying down the mortgage if we can’t even make our monthly payment due to a lack of savings and job loss? We’d just end up losing the house anyway.
^^^ I’m not suggesting you save an 18 month emergency fund. Our savings amount isn’t as high as that would suggest. It’s equivalent to about a 6 month fund for most as we receive a pension that covers 70% of our monthly bills. If you can build a 6 month fund over the next 2 years, you’d likely feel less pressure, more peace and more control when you’re faced with difficult financial decisions and emergencies. You’re at a prime age and stage in life with no children yet to knock this savings out now before things get really more complex.
We finally saved up a six month fund, about half in a CD ladder. It took a long time. And honestly, it doesn’t feel that secure if you walk through the scenarios that would require tapping into it. My hubby wanted to drop disability because it is expensive. I said, not without saving up an 18month E fund, first. Without disability insurance, those scenarios get really scary.
Emmi, I agree to a point, but it definitely feels better than having just $1,000 to fall back on. I don’t ever want to have to tap into it either, so I can’t say I feel totally secure, but I feel like we’ve bought a little time to figure something else out in the event it’s needed.
Do you get long-term disability insurance from your employer? Ours is very cheap (about $17 a month) and we just recently took it out. Can’t believe we didn’t think about having it before and I really can’t stress enough how important it is to have if you have the ability to get it. A coworker suffered a back injury that put her out of work for 18 months. She only had short-term disability coverage and is only 30 years old. The company let her go after the short-term ran out and she lost her house. It was a wake-up call for us.
I really like Michelle Singletary’s personal finance advice, and she recommends having at least 2 different emergency funds. One for “life happens”, which is for when the tire blows, or the fridge dies, or those kinds of events. The other for the big life-changing events, like a job loss. The latter she recommends having at a level to cover at least 6 months of living expenses. It takes a lot of sacrifice to build those up, and it’s really hard to do when you’re trying to pay off debt, but what a relief to know you’re covered. Maybe start with trying to build up a month or two, and then go from there.
That’s what I have – my “disaster fund” which now has one year’s worth of take home pay in it (easier to calculate than tallying up all my expenses), and my “slush fund” which I use when something unexpected messes up my cash flow. I have a set amount from each paycheck placed into the slush fund, and I used to do the same for the disaster fund. Now I divvy up any surplus between paying early on the mortgage, the disaster fund, and saving for vacation and large purchases.
I will say that having a significant rainy day fund DOES reduce my stress level!! My condo association needs to levy a $300-400 assessment to fix some maintenance issues and it’s nice not having to worry where that’s going to come from. (Of course, we might not have to levy that assessment if we had been building up a reserve from the beginning……. *grumble*)
Oh, and I forgot to add, that if I had created an emergency fund from the moment I moved out of the house I probably wouldn’t have racked up credit card debt with things like car repairs. I’ve since paid all of that off – about 10 years – and now my only debt is my mortgage. But I groan thinking about how much I could have saved if only…. And maybe I would have bought a condo BEFORE the real estate jumped sky high. Oh well.
Paying off 10 years of debt and changing those habits in the meantime is HUGE. I learn a lot from your comments! Thanks for sharing your experiences with us!
Aw shucks 🙂
One GOOD thing I did the minute I got my first “real” job is that I signed up for the 401(k), and since my salary was low enough for me to take the IRA deduction I opened up an IRA account, too. I was great at shovelling money into retirement accounts, but never thought to start an emergency fund. I think a weird psychology was going on – I was scared I’d end up old and poor, yet retirement was far enough away that saving up for it didn’t seem impossible. On the flip side, the idea of saving 3 months of expense was daunting. Also, my family did a great job of explaining investing and why debt is bad, but they never talked about budgeting or emergency funds. (Btw, this was before Roth IRAs, so there was no way I could withdraw anything without paying the 30% penalty.)
I ended up attacking my debt when two things happened. The first, I was a consultant back then and I get placed on a travel assignment. The company at the time would pay you extra for travelling – sort of like hazard pay. Plus, we got a per diem from the client to handle things like dry cleaning and food while on the road. I managed to keep my travel expenses low so I could make a profit on the per diem, and I didn’t really need the extra travel pay, so now I had extra money each month.
The second thing that happened at around the same time was that I read an article describing the “pay your highest interest debt first” approach. Before I had been making more than the minimum on each of my credit cards, but I was very wishy washy about it all – I didn’t know which to tackle first. The article gave me a plan. So I paid the minimums on the low interest cards and put anything extra on the highest interest. I began to see results right away which kept me motivated.
After the debt was paid off I began saving for an emergency fund. Also, at this time, I had a small windfall when a bond my grandmother had gotten for me way back when matured, so I put that in a money market account at my bank. That gave me a bit of a lift in sticking to creating an emergency fund. Getting that small leg up made the task seem less daunting.
In short, I’ve been very lucky that random windfalls helped me overcome my debt and jump start my savings. At the same time, while my family failed to emphasize the importance of an emergency they did instill in me enough sense that I didn’t blow any windfalls, nor was I ignorant that my credit card was a bad thing.
If you have that kind of money saved for a rainy day, do you keep it in CDs, a savings account, or what? I have 9 months’s worth of expenses saved up but have a really hard time seeing the low returns. I even put some into the stock market – I know that makes it less safe which is the opposite of what one should do with an emergency fund….
If the rates were higher on the CDs I would ladder them, but it’s such a paltry return for locking up my money I don’t bother. Instead I keep it in a money market account at my credit union. I also lucked out in that my credit union has this crazy deal where you can get a special companion savings account that pays 4% on the first $3,000 balance!!!!! Now I know why my grandmother was so excited about a 10.5% CD she got back in the 80’s.
On the plus side for the low low low interest rates I was able to refinance my mortgage into a 3.25% rate. The much lower payment will help me pay it off sooner.
I’ve been wondering about this actually. I want to be sure we only use or emergency funds for emergencies, not run to the bank to get money every time we think we need to get something or we have to fix something. When I had a lot less money, it seemed like I was more creative about coming up with ways to solve problems without spending a ton of money. I think my point is that I’m afraid ill use the money more if I have access to it, which makes me think maybe we should make it harder to get access to. The stock market isn’t realistic for us right now, nor are CDs really, but I might want to explore some other options.
The stock market is definitely not the place. I know that. You could call it greed on my part and it may come back to bite me at some point. So I’m keeping an eye on it pretty closely… It would be especially bad to do this if I was in a job that could be downsized in a bad economy. (I work for a university so that is highly unlikely for me).
On the other hand, if you make your emergency difficult to access, then you’ll have trouble getting to it in a true emergency. So it’s a double-edged sword. I keep mine (the part that is not in the stock market) in an account at a separate bank. I have the account linked to my main checking account so that I can easily add to it. However, I never take money out. Because it’s at a different bank and I have no checks set up, it would take 3 business days to access any of the funds. Because I don’t have any regular bills go through that account, mentally I don’t see it as usable for daily purchases.
Adam, my adult son has ADD and he has a very successful career, but he, like you, had to admit he needed the meds to focus. I know there are lots of opinions on both sides, but do what’s best for you. Sometimes the untreated person doesn’t know how much his lack of focus affects others. I think building up the emergency fund is a great idea too
I have a friend who does really well with mindfulness meditation. But that took years for him to master.
1. HAVE AN EMERGENCY FUN! That’s really important, anything that happens can be ‘averted’ with it.
2. Have a side job or anything to earn few bucks. You never know when it can turn into a full time job.
3. Keep a fresh resume open 🙂
That was probably a typo but EMERGENCY FUN is awesome 🙂 Doesn’t everyone need that, too?
I love this post, Adam. I think it’s smart and proactive to analyze the situation and learn from it. I totally agree with your first two points, and would add another of my own that I learned while going through something similar – trust your gut.
When I was interviewing/first starting that job, I got a gut feeling that something wasn’t right. But I really wanted the job because it looked good “on paper.” That whole painful experience taught me that if I get the feeling that something isn’t copacetic about the situation, then there’s a good chance it isn’t and there’s trouble ahead.
A hard, horrible learning experience for sure. Wouldn’t it be easier if there was some sort of life manual? I’d rather have that instead of the school of hard knocks any day.
I’ve had really great luck with the savings accounts at smarty pig. I like two things: first you can easily divide into different “goals”, which mentally works for me ($1000 emergency fund, new car, saving for Christmas, etc) and second, you can only withdraw the money if you withdraw the whole lump sum. It’s accessible at any time for a true emergency, but keeps me from taking out $20 here and there.
Cool idea! That’s more along the lines of something that could be really useful for us. I’ll look into it.