When the spectre of redundancy comes calling – have you got enough money to survive?
A close work friend of mine revealed he was “offered” redundancy today 1. It was a shock to both him and I, but deep down we (should) know this could happen to any of us at any time.
Anyway we went for a few beers after work so I could be his sounding board and apart from the usual you’d expect in this situation, I was really quite surprised at how bewildered he seemed. This was a guy who I would say is pretty frugal. Without revealing too much, he had managed to set up a pretty cushy living situation for himself whereby he could work from home in a mortgage free house with his family. He could well have passed for a closet FI’er if I didn’t know any better. So I would have thought he would have some cashola saved up for a rainy day. He may well have for all I know, but I got the feeling from our conversation that it didn’t amount to anything that substantial if he had. Alternatively I could be way of the mark or he was being cagey, and the bewilderment was simply down to being told he wasn’t wanted anymore? Who knows! It’s a brave man to ask for another’s balance sheet details and I am not that brave (or rude).
I also thought that I would be ecstatic if they’d offered me the same deal (he has been there 10+ years so similar time to myself, i.e. big time redundancy money). But again, I guess I will never know until it happens. Even if I really wanted to leave somewhere, it cannot be nice knowing that you are surplus to requirements.
The bottom line of all this though is clear:
No One Is Safe
This was a solid and reliable employee for 10+ years and he has been shelled like a pea from the safety of the corporate pod with barely a second thought.
Live Within Your Means
Regardless of whether you want to leave work ASAP or not, you owe it to yourself and family to at least have some back up savings to cover your arse if the worst was to happen! I can’t believe I lived for many years without any significant savings, even though I could have amassed them with relatively little pain or change in lifestyle. Fair enough, I didn’t/don’t have any dependants but I would have been up sh*t creek for at least 8 full years of the 11 I have been working for if I’d have lost my job. A sobering thought indeed.
Again, I don’t know the exact details but I can’t help thinking that if my friend had a bigger safety net to fall back on, he wouldn’t have felt so bad about the whole situation.
Have you or anyone close you ever been made redundant? Was it a cause for celebration and a well deserved break from the rat race, or was it a wake for you/them to get your financial house in order?
Notes:
- The ironic fact that I wish it had happened to me instead of him was not lost on both of us, him having listened to many of my (mainly drunken) ramblings on how I am going to quit “at some point soon”! ↩
Discussion (20) ¬
Pretty much all of my close friends have been made redundant at least once by now (a couple have been through the fun twice), due to our initial choice to enter the banking industry. Note that I’m only 30 so it’s not been a long career yet! I also took voluntary redundancy to get out of the rat race with the nice pay-off.
One particular friend of mine sounds very similar to yours. She lives conservatively and while she & her partner have a mortgage, she’s always been so scared of potential redundancy they ensured that it would be low enough that they could afford it on one salary without any problems. When she got made redundant, I thought she had nothing to worry about – especially given 3 months gardening leave where she was paid and didn’t have to work – which allowed her time to sort out her next move.
Instead, she was nervous, anxious, constantly worried, refusing to spend any money – I think the most extravagant thing we did during that time was go to the cinema! I don’t think the frugality was bad in itself, but it was borne of fear, not of rationally managing her money. She stayed that way until she got a job offer, about 2 months into her gardening leave period. She’s exactly the type of person that doesn’t really get FI – she think wealth is measured by your income and thinks herself too risk-averse to consider investing (but at the same time has a dream of becoming a property mogul and living off rental income).
On the other hand, I had another friend get made redundant last month. Instead of worrying, she’s spent her gardening leave on a skiing trip and continuing her cellar conversion. She has about £30k on credit cards, a sizeable mortgage and just bought a £1500 bathtub. She’s confident that she’ll be able to leverage her network to land another job with ease.
All in all, I think there’s a happy medium somewhere between the two!!
Hah… I guess you are used to a high amount of turmoil in the banking industry then! Our industry was not really affected by the recession much so it is a relatively rare thing for redundancies at our place, which probably made it even more of a shock.
Oh man why is everyone taunting me with all the voluntary redundancy stuff! 🙂
I guess people have wildy different mindsets when it comes to this sort of stuff. I would have thought anyone who has gotten anywhere in the cut throat banking world would have a bit of self confidence they can ride out the storm, and perhaps an interest in investing… but I guess I would be wrong! And your other friend is at the other end of the spectrum yes… far too confident I think!
Oh well… it would be a boring old world if we all said and did exactly the same thing wouldn’t it 🙂
Hi Fiery One,
The threat of redundancy has happened to me 3 times in the past. Each time I ended jumping before I was pushed / the company collapsed. Each time I came away with no redundancy money. Heyho. This forced me to be frugal and very self-sufficient from a young age. With each jump my financial situation improved (pure luck). I made sure that I concentrated on paying off my mortgage above all else, as I nearly lost my house in the early days. I had and still have no external support network if things got tricky.
Frugality and self-sufficiency are now the norm and require no effort. All in all impending redundancy forced me to focus my attention on what was important. If I hadn’t had these experiences I doubt I would be where I am now, with a stash, heading for FI.
I hope that your friend comes away from this and sees it as a positive experience. I did.
Big Monkey.
Hi Simian One 🙂
Sounds like you made a huge positive out of the potential 3 negatives which is a refreshing change.
I hope he does too, thanks on his behalf for the kind words and for chipping in with your experiences.
Funny you should mention this but I’m pretty much in the line of fire for the next lot of redundancies in my organisation which are expected to be announced in the next 18 months or so. However, if a voluntary redundancy package is offered and it comes with the early release of my pension, (as it has done for the last 2 lots of people who have gone), it would actually be a good option for me as I’m hoping to go in 2 years anyway and the extra £20,000 or so would come in very useful. 🙂
Fingers crossed for you Cerridwen!
I could have stuck it out a bit at my place to see if I’d have gone as well as they do seem to be clearing out some of the older “dead wood” (wrong term but just means employees that have been there a while), but without sounding too bigheaded, I don’t think they would have got rid of me unless I pretty much downed tools and/or turned into an asshole, neither of which I’d really want to do just to get a pay out.
Anyway I guess I’ll never know now so no point in really wondering about it!
I have experienced the redundancy scenario twice in the last 2 years!
The first was a shock, I had been concerned that I may lose my job as a manager my head was above the wall and ready to be chopped if a scapegoat was required – the nature of a career in retail! It had happened so many times to my predecessors it was expected at some point. So I had been paying down my mortgage and stashing cash to give me a buffer – by no means FI but would give me a year’s safety.
It was never-the-less a shock when I was given the news and told to pack up and leave immediately. I could survive but emotionally its a traumatic time. Regardless of whether it is expected or not – when it happens it is still hard to take in.
There was a big push from fellow redundant colleagues to get another job so within 3 months I had a new job. Great! So the redundancy payoff was used to clear my mortgage and buy a BTL. It made me think about creating security as I knew it could happen again – and focused my target on FI!
I thought this would help if it happened again, which it did last year when the company I was working for was sold and the new owner hacked the staff down completely – I was one of 700 to go.
No redundancy money this time – asset strip job – managed to find another job (3 months in now) and continuing to work towards FI with even more vigour as I dont like the new job and want to have my freedom and chose what I do rather than be holden to “The Man” and the “Prison Camp”. I am 47 and want out ASAP.
SparkleBee… the retail industry sounds very cut-throat indeed! Is that what you’ve done your whole working life or have you moved around?
Sounds like you made some wise choices with the first redundancy’s payout… nice one. I bet a lot of people would have blown most of it!
Working for The Man truly does suck, from other comments and your blog it seems you are nearly there, and I saw that you aren’t enjoying the new job, have you got an exact date in mind yet or is it still a while off? Could you jack it in and find another more fulfilling/flexible/more chilled out job before you hit the big number maybe, even if it meant a little more time in the work force?
Hi TFS
My job has been ‘at risk’ twice now, between 2008 and 2010. The first time it happened, I was angry, shocked and upset, as if my world had fallen apart. I went through the process and the company kept me on.
When it happened in 2010, I actually thought that if they offered me redundancy, I would take it voluntarily – I’d clocked up 15 years by then so the payout would be a good one and whilst I didn’t have a plan, I didn’t see it as the end of the world.
Again, I missed the axe but I know that at some point, the threat of redundancy will rear its ugly head again.
I hope things work out for your friend – it’s possible that they’re still in shock and just aren’t thinking straight?
Hi weenie,
It’s always going to be an awful process going through it whether you want to jump or not I suppose! Weird that they’ve made you go through that twice. If it happened again would you be able to get another job easily or are you hoping that you’d be practically FI by then and the payout may push your future fund over the edge?
I agree he must have been in shock, only found out that day we went for a pint! He is off snowboarding at the moment (nice) so hopefully he’ll have time to reflect and put things into perspective when he’s back. There is a chance he might still stay on but take a big pay cut as well so maybe that situation will play out. I’d take the money and run if I was him though!
Redundancy is such a painful word from a North American linguistic standpoint, but it is far more accurate than “laid off” which makes being made redundant soft and cushy.
Even though the current job is layered in some safety, it’s always on the back of my mind that jobs can be made redundant at any time. It motivates me to sock away as much as I can while the giving is good.
In this respect we Brits have it a bit easier than you guys I think. By the sounds of it the employment laws are a lot tighter here and you can’t just be laid off (we use that phrase sometimes as well) for practically no reason. I think the mandatory payouts are much higher as well. Although these rules are to protect workers I have found that they also tend to make it hard to get rid of geniune dead wood and that sometimes this makes life harder for the all of the other hard workers in a team because they have to pick up the slack! So maybe we’ll call that one a draw (unless you are a slacker, then you should move to the UK! 🙂 )
And yep agreed – another reason of many why it makes sense to spend less than you earn!
Cheers!
It’s like a little warning, or a gentle reminder perhaps, that we could all literally be ‘podded’ at any time. I coincidentally wrote a post a few days ago, about what happened to me when I lost my job, and I came across another blog yesterday who had a post on job loss… Is there something in the water?
Oh really, that is a coincidence!
Often happens in the PF blogging world, I guess there are so many blogs out there that subject cross over is likely to happen every so often though.
I’ll pop over to have a read of your post now… cheers
I got made redundant 4 years ago. I was 26 at the time and didn’t really have much in the way of savings. I also had various direct debits going out of my bank account that I couldn’t cancel. For example I was paying £37 a month for a laptop and still had a year to go on the payments for that. I remember really feeling awful, knowing I’d probably have to ask my parents for help because the dole just wouldn’t be enough for what I’d committed to.
I was fortunate to get another job after a couple of months, but it started me off in changing my ways. I started keeping a spreadsheet of all my income and spending, tracking every penny (funnily enough I later found out tracking every penny is one of the steps in ‘Your Money or your Life’), trying to see where I could cut down, get rid of all these direct debits and really start saving.
And then about a year later I saw this documentary on the BBC, I think it was called ‘Money’ or something like that and there were various people who’d become financially independent. A lot of them had read ‘Rich Dad, Poor Dad’, so I read that and it really opened my eyes. I’ve since discovered better books, but for the basics of saving, investing, and thinking about wealth I can’t recommend Rich Dad, Poor Dad enough.
I now have a much better paying job. Recently I’ve been saving about 60% of my income. I have 2 properties, one that I live in and one that I rent out, and I’m looking to buy another. I’ve also started saving in a Vanguard index tracker which seems to be doing quite well.
I work for a bank and I’m acutely aware that redundancies get made every year. I’m a business analyst and we already outsource a lot of our work to our office in India – maybe I’m being pessimistic, but I’m sure it’s only a matter of time before they consider my job too.
So, all in all, redundancy really was a wake up call for me! I’m now really set on becoming FI as soon as possible.
BTW, good work on the blog, it’s become one of my regular website visits!
Hi Wephway!
Thanks for chipping in with your experiences on the redundancy front!
It’s funny how some people see such things as a wake up call to get their shit together yet others would just moan about it, “woe is me” and all that, and pretend everything is out of their hands and everyone is out to get them. Change what you can to make a positive outcome and stop worrying about the rest of it!
It scares me a bit thinking back to my early and mid twenties when I first started working. I wasn’t exactly living paycheck to paycheck but it wasn’t far off. I just never really worried about it at the time. The petulance/naivety of youth eh!
Thanks for the kind words about the blog and glad to hear you seem to be well on the way to FI and got the wake up call a little earlier in life than I did. And I hope to hear from you more in the future!
Cheers!
Job security is something to be read about in museums. I’m 99% going to get the chop in November, which is bad timing for finding another job as it’ll be just before Christmas, but the payout should be around £20k, which is a silver lining, and in the short term will give me the option of hopping onto the housing ladder, albeit right at the bottom, mortgage free.
Hi Greggles… thanks for the comment!
Wow mortgage free with your first house step onto the housing ladder, that’s pretty impressive!
Will you be able to find another job easily in your area of expertise do you think, hopefully the answer is yes?
Cheers!