The Wall Street Journal ran a piece last week called “The Severance Economy.” Reporter Mary Pilon profiled executives who chose to maintain their lifestyles after losing their jobs…regularly dining out, taking vacations, daily Starbucks runs, utilizing housecleaning services, purchasing cases of $36/bottle wine, expensive salon visits…rather than economizing.
Unemployment? A mere bump in the road when there’s a generous severance package.
Or not.
Each of these folks burned through their all their severance money and much if not all of their savings, not one has landed a job – and they’re all getting desperate.
(One plowed through $200k in severance and is now rapidly depleting savings of $100k – he calculates that his family will be completely out of cash in six months.)
What do these people have in common?
Unrealistic Expectations
Each assumed he or she would land a new job fairly quickly.Refusal to Curtail Spending
They continued to maintain their (sometimes lavish) lifestyles with no changs.Didn’t Come to Grips With Reality Soon Enough
While each of the candidates eventually realized the folly of their ways, the day of reckoning didn’t happen soon enough. Case in point: one is fending off calls from creditors and considering filing for bankruptcy.
Foolishness? Well, yes. But I’ll tell you what…it’s also pretty common.
As a recruiter, it wasn’t unusual for a candidate to call and say he’d lost his job and needed to find something – but wouldn’t be available to interview for 3-4 weeks. Why? Because he had to get away and “decompress.” He was going to take that severance package and splurge on a really nice vacation with his family. After he spent a significant chunk of the money, then he'd think about looking for work.
I recall another candidate telling me he was going to use his severance money to immediately purchase a sports car…his self-proclaimed "midlife crisis indulgence" and something that would "distract him" from the job search ahead.
Especially when the economy is unstable and the job market is weak, imposing financial discipline is important. Try to have at least six months of savings as a cushion in case you lose your job. And if you are pink slipped and receive a severance package (which, by the way is becoming less likely and less generous if you do get one), cut back right away to make the money last as long as possible.
Your search could take a while…and unlike the Federal government, you can’t fire up the presses and print money.
The Interview Edge - required reading for people who are serious about their careers.
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