Welcome back to Losing My Six Figure Job. Let’s cover The Severance Budget today.
You are probably wondering what the heck is a Severance Budget. I know I would be wondering that too if I was not in this situation.
So let’s get started…..
Honestly, I am not used to having a budget. I have managed my finances well and I make a pretty decent income up until recently. I am losing my six figure job in March. This has obviously prompted me to take a different approach to my finances.
What is a Severance Budget?
That is a great question. It is the opportunity to spread out your severance package for an extended period of time. It can allow you to take some time off and still cover your bills (as in my case) or it can provide financial coverage until you find another job.
How do you implement it?
- Write (or type) all of your bills out….and I mean everything!
- Determine what your minimum monthly payments will be.
- I prefer to use excel for this task. It is a simple program that most people know how to use but you can use whatever works best for you.
- Trim the fat!
- Take a long hard look at your bills and determine where you can “trim the fat”. Elect to eliminate things that are NOT a necessity.
- This can be very hard to do but it will be well worth it in the long run. Remember…your goal is to stretch the severance money as far as you can while still paying your bills in a timely manner.
- Try to refinance as many items as you can to reduce the monthly payment before your last day at work. Why do it before your last day? Because you will not have a job and most creditors will NOT be willing to work with you when you are unemployed.
- Pay yourself a pay check!
- It can be very hard not to spend your severance money when it is paid in a lump sum amount.
- Move ALL of your severance money into your savings account immediately.
- Next, pay yourself the “net” amount of your pay check that you received at your old job.
- This means moving the “net” amount of your pay check from your savings into your checking account.
- What is the “net” amount – This is the amount that was deposited into your bank account each pay period.
- Think of your savings account as your new employer. You wouldn’t ask your employer for more than what they have agreed to pay you.
- If you were paid $1,000.00 “net” on the 15th and last day of the month, then stick to that same payment schedule.
- You can simply transfer $1,000.00 from your savings into your checking account on the 15th and last day of the month.
- Resist the urge to splurge!
- It can be very hard not to spend your severance money when it is paid in a lump sum amount but RESIST THE URGE TO SPLURGE!!!
- Don’t get me wrong, you can make a wish list of things you may want. I know I did. However, be realistic and remember that you may need to live on the severance for an extended period of time. So be wise with the money you have.
Until next time my friends, Christie