Though there certainly are sectors of the economy that are flourishing (namely government, healthcare, and energy according to USA Today), the fact remains that many people working in the private sector are getting pink slips or laid off due to restructuring and, if they’re fortunate, a severance package. If you’re among those being terminated what you do with that cash is important since it’s meant to sustain you and your family for a while until you can find another job … OR, you can throw caution and frugality to the wind and blow it, acting as if nothing ever happened, avoiding ways to make extra money, and neglecting your interview skills.
Take a vacation
While vacations are certainly a great time to build family bonds, see new sights, and expand your horizons, now is NOT the time to be focused on that particular horizon. Now is the time to focus on restructuring your career. “Layoff” the vacation.
Pay down debt.
As much as I preach the anti-debt message, now is not the time to use your severance package to pay off debt but to build up cash reserves. Make minimum payments on your debt obligations when you’re looking for employment. You never know when you’ll need that cash.
Refuse to network.
You’re probably NOT going to find that new job in the classified ads of your newspaper (if your city still has one). Your best chance of finding your next job will be through networking. The key is to “dig your well before you’re thirsty” and build that network before you need it.
Buy a new car.
It doesn’t have to be a car, it can be a new bedroom suite, or a home theater system, or a swimming pool. Don’t fall into the emotional trap of spending money and acquiring things to make yourself feel better. That is a temporary feeling. You’ll feel much better knowing your severance package is cash in the bank and that you’re making progress in finding a new job.
Start a business you know nothing about.
Don’t let a sudden, large infusion of severance package cash cause you to go crazy. Stick with what you know. If you’ve worked in an industry for several years and have observed inefficiencies, by all means, consider starting a consulting business to address these issues with other companies in the industry. On the other hand, investing your reserves into a business where you have very little or no experience is not a wise choice. The “80 percent of all new businesses fail in 5 years” quote is generally referring to people who jump into a business that they know nothing about.
Blow off offers of additional training.
If part of your severance package involves additional training or the opportunity to finish your degree, always take it unless you already have another offer of employment and you’re facing time constraints. Additional training can help you secure a higher salary at your new job by making you more valuable and well rounded.
Discover online casinos.
Online gaming has become an escape mechanism for far too many people. Don’t allow yourself to fall into this trap. You’ll only lose your severance package, your shirt AND your dignity.
Invest in individual stocks.
Don’t put your cash into anything that’s risky and stocks are too risky as a short term holding account for your severance package. Keep this money in a money market or other highly liquid account.
Get a divorce.
I’ve said it before and it bears repeating: “Love is grand and divorce is 50 grand.” It’s actually much more than that. This is a stressful time for everyone in your family. Make the conscious decision to work through any problems and develop a patient and listening attitude. If that’s not “who you are,” then BE someone else for a short while.
Let your insurance lapse.
I did this. It wasn’t pretty. Check with your company’s human resources department for information on COBRA insurance for your medical needs. I know it’s expensive but it’s cheaper than an uninsured hospital stay. An uninsured medical emergency is NOT what you need right now. Make sure your life insurance premiums are paid on time. I believe everyone needs some life insurance, even children. The average cost of a funeral is $6,000 and the premiums on a child are minuscule in comparison. Stay in touch with your insurance agent and keep him or her apprised of your financial situation. There could be programs to help you bridge this gap.
The decisions you make right now can have a tremendous impact on your future. If you’re facing a layoff or job termination with or without a severance package as part of the deal, make certain you step back, think logically, and make wise decisions. You CAN come out stronger on the other side, stronger, wiser, and happier, but it will be up to you to make those wise decisions, to improve your finances, and to live a newer and better life.