Frugal Zeitgeist (LOVE. her. blog.) posted an incredible link to WSJ about Life on Severance.
Some choice paragraphs:
Paul Joegriner hasn’t worked since March 2008, when he was laid off from his $200,000-a-year job as chief executive officer of a small bank. But you wouldn’t know it by appearances.
His wife, Marzena, shuttles their two young children to private school every morning. The family recently vacationed in Virginia Beach, Va., and likes to dine on Porterhouse steaks. Since losing his job, Mr. Joegriner, 44 years old, has had several offers. He’s turned each down in hopes of landing a position comparable to what he held before.
…….
When Michelle Patterson was laid off as an executive director of marketing for a publishing company in January, she figured she could subsist comfortably, at least for a while, on the $20,000 she had reserved from her savings and severance combined. She continued to eat out regularly and made daily Starbucks runs.
Ms. Patterson sometimes wishes she had cut her spending earlier. But the money spent networking and socializing, she says, has “helped [me] keep sane.”
Although their rent was cheaper, Mr. Hipsher says the family continued to spend like before. They moved with three cars — two BMWs and a Chevy Silverado. They continued to buy cases of $36-a-bottle wine. They spent $250 a month on a cleaning lady, and Mr. Hipsher dropped $50 a week on flowers for his wife. The couple still dined out regularly.
“We were stupid,” he says. “You become accustomed to a certain lifestyle. When your world changes and things dictate that you change, you’re pretty stubborn to give things up.”
FZ makes very plain and simple observations:
This guy spent his entire career in banking, most recently as a chief executive officer. If he can’t run his personal finances responsibly, what does it say about his ability to run a bank?
Buying coffee out every day instead of making it at home? Really? Seems to me that if things are as desperate as the man says, this isn’t a good way to blow $655 per year.
WELL SAID!!!!
So go read the entire article now. I’ll wait for you here. Go.
Okay, now that you’re back…
This former-CEO is a bit of an idiot.
(Should I add his story to my Idiot archives? I have a doozy of a story coming up.)
He turned down several offers for 2 reasons: not enough pay, or the duties he was supposed to do, didn’t sound like what he wanted to do.
Just recently, he turned down yet ANOTHER offer that required a move out of state, citing that the contract had no guarantee of severance pay.
Seriously?
Have we not learned anything from the past year and a half?
The guy has 6 more months left to live, a $460,000 mortgage with a $2400 mortgage payment due each month.
They spend $26,000 each year on private school tuition that is getting cut next year.
They eat out all the time. He goes to 7-Eleven for coffee and because he recycles cups, he is spaving, saying that the habit only costs them $655/year.
Spaving = Saving money by spending.
If that isn’t the most ridiculous thing I have ever heard…
And they lie to the kids, telling them that Daddy is a freelancing consultant with “patchy income”.
If there is nothing more I detest in the world, it is softening reality and lying to your kids.
They probably already know, Paul.
He apparently has never craved a lavish lifestyle, but what do you call a $460,000 home, private school tuition, a wife who has the luxury of staying at home, eating and drinking coffee out all the time, and turning down 4 job offers with pretty decent pay (at least over $100k)?
Then he goes on to say that he’s thinking of installing a marble counter top in the bathroom..?
This is SO “The Idiot”.
If you didn’t want the job to begin with, based on the description of duties and salary range, then why the hell did you even apply for it?
The running theme in the story is: Regret.
Enough picking on poor Paul.
The running theme is:
Regret for:
- Not having saved more money
- Not anticipating a job loss
- Not having cut back sooner
Every one of those stories say that they wish in hindsight, they had cut back sooner, instead of anticipating that a new job would pop up around the corner.
FB’s Radical Proposition:
We shouldn’t just save money for emergency funds.
Or calculate what we need each month on a budget to save as 6 months worth of expenses.
We should actually simulate it to see if it’s feasible.
Live it.
Take 6 months, and cut back on cable, eating out, coffees and what have you.
I can totally tell you that telling yourself “$1000 a month should be enough” doesn’t seem like it’s enough when you’re actually in the position going:
“Huh. Guess I actually needed more…”
But if you put it in practice you will see for yourself that living like that for 6 months or a year, is possible (or not).
Hipsher in the story, even said:
“We were stupid,” he says. “You become accustomed to a certain lifestyle.
When your world changes and things dictate that you change, you’re pretty stubborn to give things up.”
I know it sounds strange, weird, even STUPID to some, considering that you obviously have the money to live without doing it.
But don’t knock it until you try it.
Give it a shot.
I’m not saying to do it forever.
I am saying to do it as an experiment, to see if it CAN be done and to mentally prepare yourself for any upcoming pain with a possible layoff or change in lifestyle that requires you to cut back.
Kind of like fire drills, or bomb shelter procedures. Test yourself.
Just a girl trying to find a balance between being a Shopaholic and a Saver.
I cleared $60,000 in 18 months earning $65,000 gross/year.
Now I am self-employed, and you can read more about 
Simulating a job loss is a good suggestion. I've been more or less doing since September last year when It was suggested by a Departmental HR person that I might be made redundant. Turned out he was mistaken but it had a huge impact on me. I bought 6 months supply of vitamin pills almost immediately because I thought I'll never be able to afford them if I'm not working. I did a radical revamp of my budget to the point that I now live on 1/3 of my salary.
So far I'm still working and I've got myself into a safe financial position but in all honesty I was no where near as prepared as I should have been 1 year ago.
Wow! That's encouraging. I would have done the same, and stocked up on pills 🙂
FB,
I think simulating a job loss is an interesting idea. It could give you a new perspective about what is really important to you. Also, after living on much less you might find it easier to save more for your future. Living below your means also gives you a lot more flexibility- as does paying off debt. If you own your cars outright you don't have to worry about repossession. If you live on 80% of your salary then a 20% pay cut isn't a serious problem. If you are living at 100% (or more) any decrease in pay is a disaster. Pretending it isn't is only making things worse!
-Rick Francis
Or if you live on 50% of your salary? 🙂
Simulating the worst, can sometimes be really telling of what you truly value in the end.
Meg said:
"…Then later we got together with a bunch of friends to play D&D…"
Awesome! D&D is still around…lol
How do I get a 100K+ job? 🙁 I'll take the guy's scraps…
Tell me about it. But he has a lot of experience as a C-level exec….
I can already see my mum's face! Of all things, $50 on flowers a week! (Don't get me wrong, the coffee is also outrageous, but at least you get something out of it. Flowers…well, they're pretty, but what do you do, put them in a vase, stand back and stare – "oh, how pretty!" and then let them die?!)
*laughing* ….. "$50 on flowers a week"… that was pretty nutzoid of him, wasn't it? 🙂
Wow. I really don't understand the "holding out for something better" idea in this situation AT ALL. They're broke. They need an income. Take the job with the decent-but-not-as-good-as-your-old-job salary and if it's not good enough, keep looking for something better! In the meantime, your children need to eat! I also think it's kind of funny that someone so concerned with what others will think of him that he talks about taking a night job was perfectly OK with having an article written about him and allowing pictures to be taken.
Lara, I totally agree. Your kids need to eat, feel secure and go to school. I'm sure this kind of life changing experience will prepare them for reality and teach them how to function with such drastic change.
well i wouldn't call a $400k home lavish off the bat, around here that barely gets you a crappy condo – certainly not a nice condo and definitely not a single family home
That's a good point. It depends on where he lives exactly, but from what I understood he lives out in the country, and still spend $400k on what I'd imagine to be a big home.
It certainly isn't 600 square feet!
Thank you for the link love, and I appreciate the additional insight. Ever since both of our jobs started to look shaky, SO and I have been on pedal to the metal bare bones budgeting. I still went on a trip I already had planned and set aside money for, but the rest? It's tight living, and we've learned a little in the process.
Good thing we did this: SO lost his job today.
I am SO SORRY about SO losing his job!! 🙁
This further enforces my resolve to try this bare minimum living. I should write a post about it. I've been out of control lately
Thanks. . . he's always made more money than I have (2 1/2 years together, living separately), so I think this is going to be a tough transition – all the more so because he has kids, joint custody, and a hefty alimony payment.
Any chance he could ask for a lower alimony payment now that he doesn't have a job?
Oh yeah. That's one of the top priority items on the to-do list.
*phew* Good luck!!!
I especially liked that the wife had trouble finding work as a paralegal because of the need to accommodate her schedule with the kids. If he is home full time, what accommodation does she need?
I thought that too. I found it strange, but I guess he's the "breadwinner" so he wants to be the one full-time, even though his wife could be the new breadwinner.
The whole first year of marriage we tried to live on as little as possible to help us save for some much needed things. We ended up being able to save a whole salary and live on just his. (We both made the same amount then.) It did help us know what we could live on if we had too. Its a good idea.
That's incredible.
That's exactly what people should simulate. One salary is daunting at first, but well worth it when you come out thinking: "HUH! I did it!"
Also, you save a ton of cash. I think people just need to take baby steps. I can't just chop out all shopping for everything, but slowly paring back is helping.
Yes! testing yourself is very important. My parents were of the WW2 generation so I learned thrift from them (my 83 year old mom spends only about 65% of the income from her social security and the investments she & my father made ). Sadly in my 30s I let some of that attitude go due to getting involved with someone who thought I was too "cheap". Now I'm working to get that mentality back, and save back the savings I burned through. I discovered that I was grossly underestimating what I would need to cut back on to save the money I wanted to save, and underestimating how it would feel to do that.
Hey, I did the same thing
I let it go lately, and I have to wheel myself back on track. It's time to test myself.
I think everyone should do this! I'm o.k. with spending some money on luxuries when you can afford it, but everyone needs to test themselves to see what they can cut in an emergency. And heck, sometimes you cut stuff and you realize that you don't miss it at all! For example, when my husband and I cut cable we told ourselves we could turn it back on in a month or two if we wanted. That was last December and we haven't missed it! We found plenty of other ways to entertain ourselves for free (or very, very cheap). For instance, yesterday morning we went for a 2 mile walk around the neighborhood and talked. Then later we got together with a bunch of friends to play D&D. Then after they were gone we watched Stargate SG-U on Hulu.
That's what happened with me and cable as well. I chopped it back and .. then forgot about it.
Maybe he deserves to lose it all. It may be the lesson that he and his wife need to reassess what’s important and realize they were uber-consumers. I have no problem with purchasing things, but to continue a high-maintenance life-style while the only employed person in the household is unemployed is just plain stupid. And, what are they teaching their children by lying to them about their finances? That it’s better to live the illusion of wealth than to actually have it? Ridiculous.
.-= Little House´s last blog ..Those Who You Least Expect =-.
That's the feeling I got — and I felt like they weren't really .. acting like a team.
The wife couldn't get a job because she was unable to work AND care for the kids, but he's 100% at home all the time now!?!
As a team, and as a partner, he should have stepped up, let her get the job and see where it goes.
Felt really one-sided, like it was all about him.
I don't like the idea of lying to kids and not exposing them to what real life is all about.
White lies about Santa and the Easter Bunny is okay for a while, but actual problems? Forget it, they need to team up.