Ryan was recently laid off from his job, after 20+ years. With a family to support, and a mortgage to pay, he was initially overwhelmed by the uncertainty of the future. However, Ryan had been working with a financial planner for several years, and they had already built out a sound financial plan to help ease this period in Ryan’s life, well before he ever realized this may happen to him.
The Financial Plan in Action
- Emergency Fund Utilization
- Preparedness: As part of his financial plan originally, Ryan built out an Emergency Fund that was tucked away for a rainy day. For Ryan, this was 6 months of expenses. On the low-end, this would provide him with at least 6 months to cover the mortgage, etc. until he found a new job opportunity. This kept him from going into Personal, or Credit Card debt, but also allowed him to be patient and more selective in choosing from new positions. He did not need to take the first offer, simply because he had an Emergency Fund and could weather the storm in the interim.
- Controlled Spending: With a clear understanding of his budget, Ryan adjusted his discretionary spending, focusing on essentials and temporarily reducing non-essential expenses. This helped the family stay lean, and ultimately be in a less stressful situation while Ryan found a new position, as well as after.
2. Strategic Financial Adjustments
- Investment Strategy: Together, Ryan and his financial planner reviewed his investment portfolio. They decided to pause additional contributions to non-essential investments temporarily. This strategic pause allowed him to conserve cash flow without significantly impacting his long-term financial goals. Also, since Ryan had been contributing to more liquid account types, such as a brokerage, he had additional liquid funds should he need them above & beyond his emergency fund. Again, allowing him to have more choice and flexibility in regards to the timing of his new opportunity.
- Debt Management: Ryan’s financial planner had previously advised him to minimize debt. As a result, Ryan had low outstanding liabilities, allowing him to avoid accruing high-interest debt during his job search.
3. Navigating the Job Market
- Career Transition Support: With his financial needs under control, Ryan could take a measured approach to his job search. He engaged with career coaching services, updated his resume, and expanded his professional network. His financial stability allowed him to wait for a role that matched his skills, experience, and career aspirations, rather than feeling pressured to accept the first available offer.
4. So what happened?
- After several months of searching, Ryan secured a new position that not only matched his previous role in terms of compensation but also offered better work-life balance and career growth opportunities. His patience and financial preparedness paid off, allowing him to transition smoothly into a new chapter of his career, while also measuring the viability of multiple offers, and mitigating tough financial decisions in the interim. Having a sound financial plan made all the difference.
Key Takeaways
- Emergency Fund: A well-funded emergency fund is crucial in providing a safety net during unexpected life events, such as job loss, or even things like a new roof. It helps maintain financial stability without resorting to debt. Therefore, when you’re through weathering the storm, you come out in even greater shape on the other end. According to Bankrate, roughly 59% of Americans are uncomfortable with their Emergency Savings. Ryan was not part of that 59%.
- Flexible Financial Planning: A financial plan should be adaptable to life’s changes, allowing for strategic adjustments during times of transition, in a timely fashion. As soon as Ryan was laid off, his plan was able to instantly adapt.
- Avoiding Debt: Prioritizing debt management and minimizing liabilities can provide financial flexibility during challenging times. It’ll also allow you to save more, resulting in the utmost choice and flexibility when life doesn’t go our way, as seen in Ryan’s case.
- Patience in Job Search: Financial security enables individuals to make thoughtful career choices, waiting for the right opportunity rather than settling for less. Being able to choose a new opportunity, rather than take one, provides a much less stressful transition.
Ryan’s experience is just another example of thing’s life may throw at us, and how financial-planning can make such a large difference when life does throw curveballs our way. Simply put – it didn’t take weeks or months for Ryan to ensure he was taking care of these items, it took maybe 5-6 hours per year. Unfortunately, Ryan was laid off. Fortunately, he had a plan.
