First time dealing with a layoff and doing my best to be smart in the meantime. Obviously priority #1 is finding a new job so she's updating her resume and casting a wide net. She has several letters behind her name and is extremely educated so my fear is job opportunities will be slim (although we have discussed taking something she's overqualified for until the right job comes around) so I am preparing as if we are about to become a single income household. Mainly need advice on where to direct our money while we prepare. I have to act or I'll freak out. For reference, our monthly bare minimum expenses total to about $5,000. I make about 75k a year and unemployment is like $700/wk in our state. Currently:
- We were aggressively paying down her car loan which we still owe $9500 (paying an extra 80$ a week on top of a min payment $305 monthly; interest rate @ 8.5%). We've been doing this before we found out about the layoff.
- Transferring 100$ weekly to an HYSA emergency fund where we have just under $10,000 (3.35% interest rate on that account). Also doing this before the news of the layoff.
- re-evaluating the budget to see where we can find some extra money and try and save that or pay off the car sooner.
- I've picked up some shifts playing guitar in a local house band for some extra cash, which will be saved or go towards the car.
While we prepare, would it be better to put our extra income (an any cash we find) towards the car or save it as an EM fund? I know this is situational but I tried to include as much context as possible.
Wife is getting laid off in 3 months. Need Advice on where to direct extra cash while we prepare.
byu/Equivalent-Milk-1284 inpersonalfinance
Posted by Equivalent-Milk-1284
11 Comments
> minimum expenses total to about $5,000
> HYSA emergency fund where we have just under $10,000
Sounds like that’s under 2 months of expenses worth of Emergency Fund.
Sounds like your EF has been underfunded for some time. That’s where you should prioritize.
Honestly, because y’all have been so inefficient with money, especially the car payment, I would stick it in the HYSA at this point, you’ll need money soon. You’ll get an extra $75 in 3 months, but there are no more options than that for the money you already have.
Find a job asap
What will she do for healthcare? COBRA is expensive.
I’d put every single dime into your emergency fund. You only have two months of expenses. What happens when that is depleted?
Try this prompt and adjust accordingly: You are a top financial advisor. Client typically has xyz a month after bills and groceries. They have been paying down debt, it’s at xyz and they want it down below xyz. Wife is getting laid off in x amount of days/month. How should the client handle this?
Cash is king. So NOTHING else towards any loans. You have less than 2 months of e-fund saved, you need to generate short-term cash immediately. Your wife is going to have to start a job Monday after she is laid off Friday. That could be pizza, door-dash, mowing lawns. Your e-fund is too small. It goes without saying that every expense that isn’t food on the table or a roof over your head, it gets cut. No eating out, no subscriptions, nothing. With less than 2 months expenses in an e-fund you are in emergency mode, today.
For something like this my focus would be cash flow. Realistically you will not be able to pay off her car before she gets let go, so all that extra car payment money I would be funnelling to my emergency fund instead. Ditto your surplus income.
Also cutting back in abstract and cutting back in reality I’ve found are two very different things, I’d recommend you take an honest look at expenses and cut it back now until shes gainfully employed again. $5k/month on expenses means you’ve barely got two months saved, a job search is likely to take longer. The unemployment benefit is high but don’t count on that coming in immediately, and it likely has a cap.
If you’re wife uses her employers medical insurance then I’d recommend she get in as many doctor visits as she can now before she’s laid off, cobra is very expensive and she may need to be uninsured for awhile unless you can add her to yours. Loss of coverage thru unemployment is a qualifying life event, you’d be able to add her now even though it’s not open enrollment.
Save cash. No extra payments until there is another job lined up. Sounds like your pay may or may not cover your bare minimum expenses, so you need cash to cover any gaps. And anything unexpected could really mean trouble. Good luck. After this is done I’d suggest building up a larger emergency fund.
I would stop paying extra towards the car for now and put it in HYSA. Worst comes to worst you can go a few months without paying the car as your likely ahead
You need to stack cash because you won’t be able to clear the loan on that amount of time and free up any cash flow. You probably net $3,500 a month right? So her unemployment should cover the gap
In the face of unemployment, conserve cash.
Don’t pay more than the minimum on loans. Put everything extra into the HYSA.
Clearly the emergency fund is insufficient. In the current job market I recommend 12 months of expenses.
That car loan interest is high! Is your credit score good enough that you could refinance it? You’d have to do it I’d think while she is still working. I just refinanced mine earlier this year at 4.79% through a credit union down from 5.99%. No fees associated with the refinance so made sense for me.