I’ve had my job eliminated out from under me three times in less than ten years. Along the way, I’ve learned some lessons about preparing for unemployment. I’ll share them so you can avoid some of my pain.
Three Strikes and You’re Out of a Job
First, the Great Recession claimed 20 percent of the marketing department where I worked. The new-ish CEO came from engineering and didn’t think he needed marketing. He lasted last then three years. And, he didn’t even get a seat on the board of directors as a parting gift.
Next, at another company, an expensive acquisition claimed the entire marketing department. The CEO thought he should spend a quarter of all the money the company ever raised on buying an outfit with six engineers, no customers, and no salespeople.
Then, a reorganization at a third company landed me in a dead-end job with one of my five worst bosses ever. She might even be top three material. I suggested to HR a handful of other roles I could perform for the company that would more directly contribute to revenues. Instead, the company decided to let me go.
So life goes, sometimes.
Reasons You Should be Preparing for Unemployment
You may feel weird, consciously preparing for unemployment. But preparation is like car insurance: when you suddenly need it, it’s wonderful to know it’s there.
Unemployment benefits in the US are inadequate.
I live in the San Francisco Bay Area, one of the most expensive places in the country to live. In the past, I’ve qualified for California’s maximum unemployment benefit, which is $450 a week, or $1,700 a month. In this area, you’re lucky to rent a decent one-bedroom apartment for $2,500 or $3,500. Benefits of $1,700 are a minimal cushion.
This site lists the amount and duration of unemployment benefits offered by other states. If you live in Florida, you’re screwed: just $275 a week for 12 weeks.
Unemployment benefits don’t last long enough.
There’s a saying that you’ll average one month of job hunting for every $10,000 of annual salary you expect to earn. This makes sense because fewer high-paying jobs exist, so fewer of these jobs come open. Currently in the US, unemployment benefits last at most six months. That works out okay for people looking for $60,000-a-year jobs. If you’re looking for higher-salary positions, you’re almost guaranteed to face months of no salary and no benefits.
It pays to be in a relationship.
If you’re lucky enough to be married or living with a family member or partner who fully supports you during times of unemployment, count your blessings and kiss their feet.
Ageism is real.
If you’re reading a retirement blog and also thinking about unemployment, then you’re probably right in the cross-hairs of ageism. I’ve experienced it. During one job hunt, after a dry spell of no interviews, I decided to change my resume. I removed any experience before the year 2000 and deleted the dates from my college degrees. After that, my phone started ringing, and my inbox started filling up. This isn’t scientific, but it’s enough proof for me.
Even the U.S. Bureau of Labor Statistics agrees that ageism is real. Plus, it’s worse for older women than for older men.
Unemployment is More Urgent Than Retirement
Preparing for unemployment proves the point many financial advisers make: emergency savings are more critical than retirement savings.
Retirement is a long way off, and a reasonably certain thing unless you die or decide not to retire. That doesn’t mean you can neglect retirement planning, especially considering the time value of money. On the other hand, today or tomorrow or next week your job might disappear, or you suffer a medical emergency, or your family member needs your care around-the-clock.
Start preparing and saving. Determine what a minimum monthly budget is for you, and how unemployment benefits your state offers. The gap between those two figures is what you’ll need to cover for each month of unemployment. Plan for one month of unemployment for every $10,000 in your target salary range.
Preparing for unemployment makes it easier to weather the unexpected. It also makes it easier for you to consider upgrading your job or starting your own business, knowing you have prepared for a stretch of time without a paycheck.