“There are some extreme things you can’t control. But you can take steps to have a backup plan and be flexible” says Thomas Biles, a Gainesville, Florida–based financial planner.
Jerry Grief knows this all too well. He and his wife Sandy earned $90,000 per year, had savings for retirement, health and life insurance and $25,000 in an emergency fund. “Sandy was great with money—she could stretch one dollar into two,” Jerry says. But shortly after Jerry left his union construction job for a position with higher pay, Sandy was diagnosed with cancer. Then the couple found out that Jerry’s new employer had let their health insurance premiums lapse. “I had no idea,” Jerry says. “Otherwise I could have gotten COBRA.”
Instead, the couple spent their savings and cashed out retirement plans and a $100,000 life insurance policy for its $20,000 cash value. Sandy had to stop working and Jerry had to take unpaid leave to attend to her care. Overall, before Sandy passed away, the family went through $130,000 in savings to pay for medical treatment and living expenses. Today, Jerry is contending with $45,000 credit card debt while raising two kids, now 7 and 10. “Most of this is just bad luck and bad timing,” Jerry says. “Some of this could have been avoided.” Looking back on everything, he says, it would have made more sense not to cash out that life insurance policy and instead found other ways to come up with the $20,000. “But when you’re going through this emotional life or death battle with someone you love you find the money anyway you can. You are living in the moment.”
Assemble a team of experts
Elliot Hergott, an accountant in Armonk, New York, says the time to act is actually before tragedy hits. Have an expert team in place so you can call on them when things get difficult. The team can be made up of one or more professional service advisors. Perhaps an accountant, lawyer or financial planner. They can also lead you to other professionals who specialize in areas outside of their own expertise. “Being able to pick up the phone and make a call to a single point of contact will greatly reduce stress,” Hergott says. It also helps temper any stress related financial decisions that could benefit from a second opinion, he adds.
In general, strategies for savings, investments and insurance should be part of your Plan B. Continuing education and professional development could be included if layoffs and industry contractions mandate a new line of work. In the survey, nearly a quarter of respondents said they would move in with family but it is not known what the response of the families would be.
Discuss the plan with those closest to you. Include a trusted party for an alternative perspective.
A financial planner or an accountant will be able to develop and implement a plan. These are typically for hire services but worth the cost for stress reduction alone. There experience in such matters also give you a higher chance for success.
Be sure the plan is in writing and review it. We often forget details when under pressure and having a step by step plan of action can be very helpful.
If you should lose your job, the best thing would be to find a short-term or temporary job while looking for a full-time position within your specialty. This is not easy, as finding a new job is a job in and of itself. But you want to avoid draining your savings or retirement as these are the most difficult to rebuild. If your spouse is working or you received a severance package, this can buy you some extra time. Particularly if you need re-training for a job in a new industry.