How I Was Financially Prepared for a Layoff

In this episode,  I talk about my layoff and how building a solid money plan has helped me be financially prepared for this transition.  I provide an overview of what I include in my money plan and budget and tips for how I have been able to create a money plan that is sustainable.

00:01 Introduction to Money Moxie Podcast

00:58 The Importance of a Solid Money Plan

01:18 Personal Story: The Impact of Unexpected Layoff

02:02 The Journey to Financial Empowerment

05:55 The Importance of Emergency Savings

06:23 Setting Clear Money Goals

09:41 Creating a Budget that Works for You

26:15 The Power of Automation in Money Management

27:54 Revisiting the Importance of Emergency Savings

29:03 Career Transition and Financial Security

31:30 Conclusion and Invitation to Connect

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Transcript

0:01

Welcome to Money Moxie, the podcast that's all about taking control of your financial destiny. I'm your host, Elizabeth Michel, and I'm here to help you on your journey to financial empowerment. In each episode, we'll dive into personal finance, wealth building strategies, and mindset shifts that will help you master your money. Whether you are just starting on your financial journey, Or looking to level up your money management skills. Money Moxie is here to provide you with the knowledge, inspiration, and motivation to help you thrive. Are you ready to unleash your inner financial powerhouse, improve your money mindset, and make savvy money decisions so you can secure your financial future? Then you're in the right place. Let's get started. Hello everyone. And welcome to the first episode of my podcast. So I wanted to start this first episode talking about having a solid money plan that includes an emergency savings. And why is it that I want to talk about this? Well, I think it's a topic that really resonates, or may resonate with a lot of people today. moRe specifically, I have a personal story that I want to share. That really shows why having an emergency fund is so important. I'm also seeing a lot of change going on in our economy and the industry. anD people having career changes or things come up that they have to pivot. And that requires them to pivot with their finances, too. So I'm hoping talking through this and sharing my own story and how I've set up my money planned will help and maybe provide some tips for your own financial preparedness. So let's get into it. So I want to start just by getting to know each other a little bit. It's like I said, this is my first episode. Okay. And growing up and through college, I didn't have much certainly wasn't poor, but money was always a source of stress and kind of one of those things that we didn't always have enough of. And so I took that mindset and to going through college, I put myself mostly through college and really learned on my own about managing money. Made a lot of mistakes along the way but really it's self taught around creating a money plan and how to manage my budget. I ended up building a long career and the technology and consulting space. I did all the things that you normally do. I climbed the corporate ladder. I held multiple senior level roles while I was building and leading teams. And in 2021, I. Joined a company that had experienced some really rapid growth, like many others in the tech industry during that time post 2020 pandemic, but then a year later, the landscape change and in 2023, it soon became the year of layoffs. I saw an increasing number of layoffs at competing firms. And a lot of my friends and former colleagues were impacted and in the midst of all the uncertainty, the leadership of my employer at the time, they were pretty adamant that we also be their last resort and their priority was going to be taking care of their people. I thought I was safe. buT as we all know, no matter who you work for, at the end of the day, it's a business, and sometimes a business has to cut expenses somewhere in order to stay profitable and sustain through tough times. So, my company eventually followed suit with the increasing pressure. of a significantly so down business and decided to lay off a percentage of their workforce. And I was part of that group. And honestly, I never thought a layoff would happen to me. I had a strong network. I'm a really hard worker. I've always had really great relationships with my leaders and colleagues. So when that call came that I never thought I would get, I was bummed. And on that day, in a matter of hours, I started the day like any other normal day with my meetings and deliverables, and then my company announced that they would be letting go of a percentage of their workforce. And then soon after, I was asked to join a meeting with HR who told me that as of that time, my job was impacted and I would be no longer working for the company. So to say the least, it was an intense day. I went through many different emotions. And being the type of person that needs security and control, one of my first reactions was to worry. I had worked my entire life nonstop, and I always counted on my career and my paycheck. So, now what was I going to do? Well, one of the things I did do is give myself some time to absorb before I took any action. I really gave myself permission to take a few days to do nothing but what felt good to me because I really wanted to make my next decisions about my next steps with a clear head. And in my case, that meant I took a break, I went to the gym, I got outside as much as possible, and I did things that took care of my mental and physical health. And I took that time to reflect. And the one thing that I knew for sure. is that this was the exact scenario that I had my emergency savings for. And because I had a solid money plan and an emergency savings, I knew I'd be able to cover my expenses while I figured out what was next for me. So, I wanted to share what I've done and learned over the years in managing my own money. So first of all, it would say in my money plan, I've always been very clear on my money goals. And my goals have changed over the years, which is absolutely normal. foR me personally, in my 20s, I was very focused on paying off my debts and I wanted to buy my first home. So I focused on paying off my student loans and my car loans and saving up money to buy a first home. That shifted a little bit. I was already a homeowner and then when I got into my 30s I was really focused on building up my retirements, learning about investing. anD then now I'm 40 and I'm focusing on continuing to grow my wealth. Travel is really important to me. So that's something I include as part of my money goals and my money plan. And I've also thought about maybe building up a real estate portfolio. So that's something else that I try to build goals around. And I always set short and long term goals for myself. And I build a budget and my money plan to support those goals. That also has helped me prioritize my spending. The other thing that I do as part of my money planning is have a baseline or a mindset. and mantra. And what I mean by that, so basically I always have it in my mind that I want to pay myself first and not spend more than I make. So what goes into that? So I want to make sure that I have all of my necessity expenses covered. That's things like mortgage and rents, utilities, food. I always allocated a portion of my paycheck to things that align with my goals, like having an emergency savings, paying off debts, retirement, investing. All of this is so that I could provide for myself now and take care of myself in the future. And then the other thing I mentioned as part of my mindset is not spending more than I'm making. So some of the things I was pretty intentional about is not charging large expenses to credit cards. If I was able, if I knew that I was not going to be able to pay the balance every month, um, I'm not waiting until I had the money to splurge on larger purchases or having a savings goal aligned to a larger purchase, for example, like a vacation and saving towards that. Spending that money before I have it. I always knew that increasing my debt and overspending would make it harder to achieve my goals. So I always have those goals in mind. Debt can really snowball, and if you couple that with the unexpected, like for example, losing a job, it's so much more stressful and challenging to meet even your most basic needs, let alone meet some of those goals that you set for yourself. So that's always something I've... always stride for to stick to for myself and my money plan. So I want to dig into a little bit more about how I manage my budget, how I set it up. I always was very consistent with managing and setting up a monthly budget. I knew how much income I had each month. This was after taxes any deductions like healthcare, and then I set up a budget that accounted for every dollar of my income. So essentially every dollar had a job, and this included essential expenses like my mortgage or rent, utilities. Insurance, groceries. I also had other expenses there that maybe not essential, but still things I knew was an expense I was going to incur every month. This could be like subscriptions a gym membership. And then when I started budgeting, I will say one mistake I made is trying to be super strict. So Uh, I I think like anything, when you have a plan or a goal, if you try to really deprive yourself or be super strict, it makes it a lot harder to stick to that goal. I think it's very similar to if you get into a gym routine and a fitness routine and you want to work out a certain amount of time every week and eat a certain type of food or meet a certain calorie goal and you don't leave yourself room for that. for still enjoying your life, it makes it harder to stick to that plan and harder to sustain the results. Same idea applies to a budget. sO like I said, initially I tried to be so strict and only spend on what I needed and everything else is going to go into savings or towards whatever. Like debt payoff goals or retirement building goals that I had, and it was really hard to stick to that because I didn't leave room for myself to really enjoy the money that I was making or to do things that made me happy. So I learned to create a budget that incorporated some of those fun things, some of those things that really helped me enjoy my life at the time. I call that fun money. And it doesn't mean that you're just spending on anything. I really try to be intentional with what that enjoyment or fun money was. So in my case, I love fitness studio classes. I do have a gym membership, but there's just something about going to some of my fitness studio classes that just keeps me motivated and going consistently. It changes up my routine because I can get bored easily, but it's a splurge. But it's something that I'm investing in myself. It makes me happy. It also invests in my health. So it's something I build into my budget because intentionally I want to enjoy those classes and that's something I want to spend on. Another thing is I really love my coffee and there's just something so nice about... Grabbing a coffee from my favorite cafe and enjoying it there, or maybe getting it to go and going for a walk outside to me is just so relaxing and peaceful. And that's something that I also build into my budget. I don't do it every day, but I'm probably getting a coffee for myself a couple of times a week because that's what works for me and I enjoy it. There are things that maybe like I don't necessarily need or it's something I could like take or leave. So things like a pedicure, I could go and do that. But for me personally. I don't mind doing it myself at home. I actually enjoy it because I'm in my own environment and I can maybe have a glass of wine while I'm doing my nails or watch a movie or something. So I do it at home and it saves me money there. So it's not necessarily something I spend on going out. My point is to try to build in things that you enjoy into your budget. It's something that's really helped me, and being intentional about it, I can't stress that enough, is like, asking yourself, what are the things that are going to bring me joy? What are the things that I really want to incorporate regularly so that I can enjoy my life? Whatever is important. to you or brings you joy, I think it's important to build into a budget. And then some of the other things that might be more spontaneous spending, or maybe they don't necessarily align with your goals at the time, then maybe don't spend those things or find An alternative that maybe is not as expensive. Again, I just gave every dollar of my income a job and building in money that was for fun things. Things that I enjoyed so I can enjoy my life now versus always saying I'm going to enjoy it tomorrow when I spend XYZ or when I save XYZ or invest XYZ. I think it's so much easier to stick to a budget when you incorporate. spending that you enjoy and allow yourself to enjoy your life today versus waiting until tomorrow. Some of the other things I did. I really prioritized being debt free. And I'll say this as a caveat that for me personally, I try to prioritize any high interest rate debts. you'll see and hear arguments for and against things like real estate. Some people will call that good debts because it's investing in. And for me, yeah, I think if you're a real estate owner and in your interest rate on if you have a loan on that property or those properties, it's lower or it's providing some income. That would be not be something that I'm going to pay off right away because I'll. Reap the benefits of having a low interest rate loan and maybe making some income if it's a property I'm renting out. But, when I say high interest rate debt, I mean things like a credit card. Credit cards notoriously have really high interest rate if you carry a balance on those. Personal loans, sometimes student loans. Car loans. So I always prioritize making sure that I was debt free and really paying off my highest interest rate. debt first. And I made it a priority to pay off when I was young. So I got myself out of debt when I was 20 and I stayed out of debt in my 20s. And along with that, I set specific goals for that debt. And what I mean by that is, I'll give you an example. So say I have a loan that's 1, 000. Well, maybe I said, you know what, I want to pay off that 1, 000 by the end of January. It's October now, so it's about four months. So okay, I want to pay that 1, 000 off by the end of January. What does that mean for my monthly budget? That means I'm putting 250 towards that debt every month until it's paid off by the end of January. And that was a very specific goal I set for myself when I was paying off debt. The other thing I did, and I'm going to touch on this later too, is automate those payments. So, in the example I gave, if it's 250, I'm going to set that to automatically pay towards that debt every month so I can just set it up once and forget it. The other thing I did, and this is so important to the topic I started with, which is building up an emergency fund. This has been... A game changer in my current situation of navigating a layoff because it's given me options and time. So building an emergency fund, I would say my personal rule of thumb has been 3 to 6 months of essential expenses. And this is pretty consistent with the advice I hear too. And I would say essentials are things that you need to live. Like your mortgage or rents, utilities, car insurance, health insurance your cell phone, things like that. It's not necessarily, it's not like pedicures or a subscription that you might not need or a streaming service. It's really those essential expenses that you need to live. And some of the things I would say I consider for myself, and I've heard this advice pretty consistently, too, as far as deciding how many months of essential expenses you need in an emergency fund, is If your income or job is pretty stable, and you'd be able to find another job fairly quickly, I would say three months is probably okay. If your income or job or industry is not as stable, you know that you might not find your next job right away, I would then err on the side of six months. And for myself personally, I have six months of emergency savings Especially in today's landscape where the industry is changing and it's not as, it doesn't go as quickly to find the next role. The other thing I want to point out is there's so many different factors that go into, I think, individual or personal factors that can go into deciding how much emergency savings you need. I think three to six months has always been a really good piece of advice because it's enough to give you the time to make a pivot when you need to To respond to unexpected events if you need to, to cover those unexpected events when you need to, but it's not. holding so much money that it's taking away from any other goals you have. You don't necessarily want to have a whole year's worth of emergency savings in a savings account if you don't necessarily need it. Maybe those funds can be invested and you can get higher returns there. Maybe you could put some of those funds toward Some of your goals like buying a home. So I always think that the three to six month rule of thumb is really good. The other thing that I'll say for an emergency fund is putting it in a high yield savings account, which is what I did. High yield savings accounts have gotten even more popular And it's really a savings account that gives you a higher interest rate than you would see at a traditional bank. There are a lot of online banks that provide high yield savings accounts. And one of the reasons they can do that is because they don't have the overhead of running physical branches. So they can pass those savings on to their customers. the other thing that I mentioned too as part of my budget, is just being really intentional and specific about goals and saving for those goals. So I talked about having a high yield savings account set up and having an emergency fund go into that high yield savings account. The other thing that I say for specific goals that are more like short term, and what I mean by that is if it's money that I need in the next three to five years, those are also goals that I say for And put into a high yield savings account that is separate from the emergency fund. Some examples of that for me have been like saving for a vacation. Last year I went to Europe, so I saved for that vacation. Home improvement is a good one if you're Plenty to do any renovations on your home and you want to save for that if you want to buy a home saving for that down Payments if you want to buy a new car Saving for that all those are savings goals and money that you're gonna likely need soon So it doesn't necessarily make sense to put that money in a brokerage account or something that needs time, a longer amount of time to really build a higher return. The other great thing about a high yield savings account is you're kind of guaranteed that interest rate in that account. So it not only gives you A vehicle for saving for your goals and that security, but you're also earning a higher interest rate guaranteed for anything you're saving for there. Again, I just want to emphasize that it's important to keep your goal savings separate from emergency. your emergency fund should only be used for an emergency. Like in my case covering my expenses while I figure out what my next steps are after a layoff. Other things that I would consider emergencies are maybe like a large unexpected car repair or medical bills that are unexpected. It's just important to make sure that your emergency fund is only for that for emergencies and any other savings that you have for other goals is kept separately. And the reason I say it's so important is if you had a savings account that included everything, which is your emergency fund and funds for your savings goals, it can be very tempting to spend beyond the goals that you've set. and spend some of that emergency money on something that's not an emergency. So I say anything you can build into your money plan to make it easier for you to stick to your goals, you should build that in. And that's why I keep things separate because then I'm not tempted to draw from my emergency fund for other spending or savings goals I have as part of my money plan. The other thing I did consistently is made it a rule that if I'm going to be using a credit card, I'm paying off the balance every month. So I'm not charging anything to the card that I wouldn't be able to afford to pay off and at the end of that month. I Love credit cards. I love the benefits that you can get from them. I do some travel hacking as far as like points and everything. So I think they can be a really great tool as part of a money plan, but it's so important to make sure that you're using them wisely and you're really sticking to that role of paying off the balance every month. Otherwise, The interest that you have to pay on a credit card is just not worth it. They have such high interest rates and I set up regularly scheduled payments for my credit card. Again, I alluded to the automation. I think automation is so important as part of a money planning cause it really makes it so much easier to manage your money. The other thing that I included as part of my money plan is investing. And I categorize this into two things. Retirement, I took advantage of my employer's 401k match when it was offered. I maxed out my 401k. Or if you have an I r A, any retirement accounts I have, and personally right now I have a 4 0 1 K and an I r a I max those out. And I took and took advantage of any employer matches I had if they were available. I also made sure that I invested the money in those accounts. So for things like a 4 0 1 k i r a, they're like holding vehicles for cash. You typically have to physically go and then, Set up investing the funds in those accounts. So I made sure I did that so I could take advantage of and maximize that money and make sure that it's growing for me. The other thing I've really prioritized as part of my investing plan is having a broach brokerage account and it's separate from retirements. But it's still one of those things I use for a longer term. Money growth account. So it's money that I'm not touching and don't plan on touching For at least the next five to ten or more years and it's really gonna sit there in my account being invested and growing. It's just another avenue I have to support my longer term retirement goals. And the other thing I want to say just overall in managing a budget is Automation. It's so important to make your spending and your budget work for you and be as easy as possible. So anytime I could automate a bill payment or paying a credit card balance every month, or making a payment towards a debt bill. I automated those payments. So it's like you set it up once and it just keeps going for you. And there are a number of ways to set up automation. Banks will allow you to set up automatic bill pay and that money will come directly out of your checking account. A lot of companies have account services that you can set up automatic bill pay. You can do that online. If you need to send a check to somebody, some banks will write a check and mail it for you every month. I had to do that in the past for rent payments. So I think automation is such a powerful tool that helps you stick to a money plan. It allows you to set it up once. and forget it. And it has been something that has made it so much easier for me to stick to my money plan because I don't have to manually monitor all of my bill payments every month and manually pay everything every month. I think this coupled with building in that fund money, that spending money to allow you to enjoy your life now is So helpful in sustaining your money plan long term. I highly recommend building in automation as much as possible into your money plan. I wanna revisit my reason for sharing my story and talking about the importance of having a solid money plan that includes emergency savings like I shared. I wasn't expecting a layoff. I really thought that was something that wasn't going to happen to me. I was so used to getting a consistent paycheck and relying on that income that I kind of took it for granted. And having my emergency savings has given me so many more choices and options. And Some peace of mind. I'm able to take the time to absorb, to process all of my emotions and really strategize and figure out what I want to do next. And honestly, in my case, I've also been able to Take a little break so I can give myself that space instead of having to jump into the next thing right away. I don't have to say yes to the first opportunity that comes up because my mindset isn't desperate to get that next paycheck. Or it's not critical right now for me to necessarily get that next paycheck or figure out where that income is coming in because I have that financial security. So I'm able to be more intentional about what my next steps are. I can make decisions that feel authentic to me and prioritize something that I'm excited about and something that I'm happy with. And for me personally, I've decided to use this time to work on a career change. I've always wanted to work for myself. I'm passionate about finances and money and mudgy education. So I want to be a financial coach and. Help people learn about money, be educated with money, and really empower people to manage their money and have a good money plan so that they can take care of themselves now and secure their financial future. And I think that has been so amazing to be able to give myself the time to do that and really pursue something that I'm excited about. And I would also say for anybody listening, if you recently experienced a layoff or are in a career transition and you're maybe looking to move jobs or move industries or looking to join another company, the other point I would make is if you have that emergency savings. It also gives you the ability to be selective about that next role, that next job, what the position looks like, what the company looks like, if their values and culture match your, what you're looking for. And you can also negotiate your salary and really put yourself first and not lose sight of your worth because you're not really forced into the position that you just have to say yes to the first thing that comes up. I think that's just so amazing and gives you. Some freedom not to mention the benefit to your mental health because you're able to really prioritize yourself, give yourself time and give yourself those options. So I'm going to leave you with that. I really hope this was helpful and I provided some insight and tips as to why it's so important to have a money plan that includes emergency savings. So you're prepared for the unexpected. Thank you so much for listening. Thank you so much for listening to this episode of Money Moxie. If you found this content valuable and it resonated with you, please subscribe and leave a review. I'd love to hear from you. And if you want help with improving your relationship with money and creating a solid money plan, check out the show notes for more information on how we can work together. I'd love to meet you and help you on your financial journey.