I just finished reading Life after a six-figure salary at CNNMoney.com. The article highlights two examples of the plight of the numerous recently laid off workers. Specifically, how in this very difficult job market job applicants face stiff competition from other unemployed workers, lengthening the time out of work. Even if an offer is to come, people find little wiggle room in salary negotiations and are accepting a LOT less just to get some income flowing to them.
Shaun Chedister, 30, is one of those people. Chedister was laid off from his job at Washington Mutual at the end of last year. After eight months of actively looking for work to help support his wife and four children, he accepted an offer from Ernst & Young even though the new position as an executive administrator paid less than half of what he was making before.
Needless to say, everything for Chedister and his family changes.
But the adjustment to making $66,000 a year from $125,000 has been hard. “For the last four to five years I’d been making six figures,” Chedister said. “My lifestyle had been at a certain level.”
While Chesiter is happy to be employed, he and his family have backtracked and will continue to go backwards in how they live from their housing to their cars to their dining choices.
If you’re employed in this economy, you may still, like the others before you, become one who loses his job through no fault of his own. I believe in personal accountability, but when your entire industry implodes or your company vaporizes overnight, it’s hard to argue you should have seen that particular event on the horizon
To those still employed: you’ve been warned. Do more than read. Listen. Take action.
Job loss can happen to you. If it does, a significant paycut may be your only immediate option. What can you do to prepare? For starters, live beneath your means. Ideally, way below. Build your emergency fund. How big? If you suffer a job loss, you won’t be disappointed to have “too much” money set aside for an emergency.
One of my friends recently lost his job and isn’t worried. Sure, he wants to get back to work as soon as possible. But he knows he can last a very long time without income because of the financial discipline he and his family put into place while he was still working. He can afford to be selective, at least in the short-term. Save like him and you’ll also have options if, one day, you get pink-slipped.
Twice in my life I’ve taken 100% pay cuts. Once to go to graduate school and again to start Total Candor from scratch. Both times the impact could have been brutal to my lifestyle, but each cut was a non-event. My wife and I have always lived a certain way, so our lifestyle didn’t need to be cut that much as a result of the whole non-salary thing. But even when our incomes came back, we still didn’t significantly change our lifestyles. We live how we live and we’re happy.
What have you done to prepare for the remote but growing possibility you incur an involuntary temporary 100% pay cut? If the question becomes more than hypothetical, will it be enough?