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How to
handle the Financial Side of a Lay-Off (Job Loss)
Some
Steps you have to take to know where you stand
1.
Calculating your current Financial Position
The most important aspect of a
lay-off is how it affects your current
financial position. It is therefore the
part which needs your immediate attention.
We have divided your financial assessment into
several parts. The easiest way to do this for
your circumstances is with a program like
Excel or a similar spreadsheet. But, if
you do not know how to use one or you do not have
the program, you can also do the work manually by
getting some paper with pre-prepared columns from
an office supply shop. You might not be able to
finish the process quickly, since you will most
likely have to ask your financial institutions
what your exact, up-to-date situation is. To make
it easier for you to understand the whole
process, we have filled in amounts of a
fictitious person, we might call
"Walli". "Walli" is quite
well off, the reason being, that we wanted to
show as many options as possible to cover most of
the areas you are likely to come across. The
Financial Statement of "Walli" has three
parts and a summary.

There
are a few books from amazon here
that could be helpful. Strangely enough, there
are few books about the topic of assessing your
financial status after you hit a disaster.
Books
about Budgets from amazon.com |
1.1 The Assets
What
are my Assets? How much do I have in saving,
stocks, bonds and other investments, 401k plans,
IRA's and any other form of wealth that
has a cash value and which can be realized.
The valuation of most of these items should not
be difficultto determine, because their
value is what the bank statement, or the market,
says it is. On items where you have some
disgression in putting in a value, use the
most conservative market value. That
item might very well be your home. List all those
items in a table, as shown below:
|
1.1.1.
List of liquid
Financial Assets as of this Date (mm/dd/yy)
|
Type of
Asset |
Where
Located |
Original
Value when Purchased |
Current
Cash Value if sold or redeemed **) |
Tax
Impact of Sale or Liquidation***) |
Earliest
Date of Redemption or Sale |
Other |
Checking Account |
Walo Bank |
750.00 |
750.00 |
0 |
Immediate |
|
Savings Account |
Walo Bank |
6,500.00 |
6,832.00 |
0 |
Immediate |
|
Money Market Account |
IB Bank |
4,560.00 |
4,660.00 |
0 |
3 days notice |
|
CD's *) |
IB Bank |
12,746.00 |
13,906.00 |
0 |
3 months |
|
Savings Bonds*) |
Deposit Box |
1,200.00 |
1,370.00 |
0 |
|
|
Other Government Bonds (list them
individually) |
Walo Bank Deposit |
2,400.00 |
2,850.00 |
0 |
10 days |
|
Stocks and Shares (list
individually - not 401k) |
Elec Share Trade |
23,650.00 |
31,750.00 |
1,350.00 |
Same Day |
If held less than one year,
Capital gains is income for tax purposes |
Stock Options (list individually) |
XXY Company |
12,700.00 |
27,400.00 |
4,116.00 |
3,400 shares same day,
4,500,
Dec 31,
4,800
June 30, XXXX |
Tax impact will vary |
Other liquid Assets (Gold, Cash
etc) |
Deposit Box |
750.00 |
950.00 |
30.00 |
Immediate |
|
Total Liquid Assets
(A) |
|
65,255.00 |
90,468.00 |
5,496.00 |
|
|
*) if you hold CD's or Savings
Bonds at different institutions or with different rates
of interest and different maturities list them
individually.
**) Include accumulated interest, if
known.\
***) The overall tax impact may greatly
vary, depending on your particular tax situation. Please
consult a tax specialist!

You might also have Life Insurance
policies that could be redeemed. We have not shown those
above, since you may want to keep those in the initial
stages. However, it would be a good thing, if you
inquired, how much cash the redemption of these policies
would bring. If you can find out their value, enter it in
the table above. Remember that Term Life
Policies do not have any
redemption value! Also remember that you will have to
continue to pay your premium, if you want to keep the
life insurance policy.

Retirement Assets should
be kept separate from the Liquid Assets.
The main reason is that retirement assets will usually
attract tax penalties if you redeem them (i.e. turn them
into cash) before their due date. You should consult an
accountant or certified financial planner, if you
contemplate liquidating retirement assets. But be careful
with running up costs when consulting these individuals.
You should also remember that so called certified
financial planners are basically salesmen for financial
products.
Type of
Asset |
Where
Located |
Original
Value when Purchased |
Current
Cash Value if sold or redeemed |
Tax
Impact of Sale or Liquidation |
Earliest
Date of Redemption or Sale |
Other |
IRA's (List them) |
IB Bank |
26,750.00 |
32,650.00 |
Ask Accountant |
30 days |
|
Roth IRA |
IB Bank |
12.750.00 |
14.220.00 |
Ask Accountant |
60 days |
|
410k Stocks (list individually) |
XXY Company |
14,750.00 |
29.650.00 |
Ask Accountant |
Variable |
|
Total Long Term Retirement
Assets (B) |
- |
54,250.00 |
76,520.00 |
- |
- |
|
Your non liquid financial assets,
such as your house, your boat, your plane, your sea side
condo and whatever else you have of real value, will
all carry a very high liquidation cost, if
you decide to sell them. Fire sales always attract the
"sharks" of this world. Moreover, in a
depressed market, there might be hundreds of similar
assets for sale. You also have to consider that for
instance, selling your house means real estate
commissions, and you have to purchase a new house and
move there. All these actions involve costs, include
them in your future estimates of outgoings.
Type of
Asset |
Where
Located |
Original
Value when Purchased |
Current
Conservative Cash Market Value if sold |
Tax
Impact of Sale or Liquidation |
Earliest
Date of Redemption or Sale |
Other |
House |
Mortgage see liabilities below in
1.2.1. |
525,000.00 |
575,000.00 |
Ask Accountant |
90 to 360+ days |
|
Cars (list individually) |
Bank Loan see below in 1.2.1. |
32.750.00 |
12.000.00 |
Ask Accountant |
Immediately if car is near new and
can be sold to a dealer (at a high discount)
otherwise 60+ days |
|
Beach Condo |
Mortgage see liabilities below in
1.2.1. |
200,000.00 |
185,000.00 |
Ask Accountant |
90 to 360+ days |
|
Total non liquid Assets
(C) |
- |
762,750.00 |
772,000.00 |
- |
- |
|
Do not include antiques or paintings
unless the pieces are individually and
conservatively valued at $50,000+ each.
The likelihood that you will get a decent price for any
of that, is very small. If you have items that can be put
up for auction with a good auctioneer and a reasonably
chance of interest, do so. But leave a reserve
price (i.e. the minimum you want for the item
from the auction) on it and be prepared
to take the item home, if it does not sell. You can also
try e-bay, but do not put your hopes on a quick
sale.
(D) is the sum total of your assets.
You have to keep in mind that as we have shown, these
assets have different liquidity (that is why we have
classified, or grouped them) characteristics when it
comes to turning them into cash. But for now, lets have a
look at what you owe against your assets, your
liabilities.
1.2. The Liabilities
Anything
you owe to anyone is a liability which you ultimately
have to discharge. This includes the $3,000 which your
uncle Charlie lent you ten years ago. He might not want
it back at this time, but it still remains a liability,
something you owe to someone. Therefore start to make a
list of your liabilities like the one shown below. All
the important facts about each liability are shown below
and should be explicitly noted.
You can, if you want to separate credit cards and
unsecured loans (not equity lines of loans for the
purchase of a boat or a car or any other assets) in a
separate table. Here we have grouped them together with
loans against assets. Three items are the key in that
table:
- The
Minimum Monthly Payment to stay current
- The
Current Outstanding Amount, and
- The
Unused Credit (on credit cards or equity lines or
other unsecured bank loans)
1.2.1.
List of Amounts owed (Liabilities) and monthly
Expenditure directly related to Liabilities as of
this Date (mm/dd/yy)
|
Type of
Liability |
Owed to
Whom? |
Monthly
Minimum Payment |
Current
Outstanding amount |
Credit
unused and available (to credit limit) |
When are
payments due? |
Annual
Interest Rate and other Info |
Credit Card - Visa (list each
Credit Card or store card) |
Walo Bank |
625.00 |
12,500.00 |
3,500.00 |
25th each month |
19.99% - Current |
Credit Card - MasterCard |
IB Bank |
900.00 |
18,000.00 |
2,000.00 |
30th each
month |
21.99% -
Current |
American Express*) |
AMEXCO |
1,660.00 |
1,660.00 |
0 |
15th each month |
Paid in Total each Month |
General Bank Loan |
Walo Bank |
743.00 |
24,750.00 |
5,250.00 |
25th of the month |
8.5% - Current |
Revolving Credit Equity Line |
First Bank |
1,520.00 |
76,000.00 |
9,000.00 |
25th each month |
7.2% - Current |
Car Loan (list for each car) |
First Bank |
750.00 |
23,500.00 |
0 |
25th each month |
8.4% - Current |
Car and Boat Leases (list
individually) |
First Bank |
1,350.00 |
67,000.00 |
0 |
15th each month |
11.2% - Current |
Mortgage on each residence (list
individually) |
Federal Mortgage
- Primary Residence
- Secondary Residence (Condo) |
2.185.00
1,212.00 |
378,000.00
180,000.00 |
- |
25th each
month |
6.9% - Current |
Total Liabilities (E) |
|
10,945.00 |
781,410.00 |
19,750.00 |
|
|
*) AMEXCO does not have a credit
limit, but you have to pay whatever you spend at the end
of every month.

The size
of your liabilities have obviously implications for your
months expenditure. If you can reduce some of the
liabilities, you will be able to reduce your monthly
outgoings.Therefore, you should immediately stop all
expenditure on credit cards by all family members.
|
|
Net
Worth against Original Purchase Value |
Net
Worth against lowest Current Market Value |
Credit
Unused |
|
|
The Net Worth and
your Unused Credit (F) |
|
100,845.00 |
157,578.00 |
19,750.00 |
|
|
The Net Worth is
a very important number for your financial stability. It
is, after all the financial manipulation and acquisition
frenzy you go through, the amount you really own.
We have two values which might be helpful: One against
what you originally paid for your assets, and one against
the current conservative market value. It could be that
you owe more than your assets are worth. This could
happen if the value of your house has fallen
significantly or if you "sailed close to the
wind" and obtained mortgages that have exceeded the
value of the house, what they now call euphemistically
sub-prime mortgages. Then, you have a real problem and
you might have to "negotiate" yourself out of
this dilemma. The unused credit amount is really
not something you should tap into, since you currently
will have little income to pay credits back and you want
to reduce expenditure.
|
|
Net
Worth against Original Purchase Value |
Net
Worth against lowest Current Market Value |
|
|
|
The Net Worth excluding
Long term retirement assets (G) |
|
46,595.00 |
81,058.00 |
|
|
|
We also stated that you should not
liquidate your long term retirement assets, because there
may be significant tax implications if you do that.
Therefore, your more realistic NET WORTH
is the one shown above.

1.3.
Current Expenditure
Your
current expenditure should be divided into the amounts
you have to pay, because you have some asset obligation
(or covenants, for instance when you lease a car or have
a note on a car, then you will be obliged to carry an
insurance cover, even if it remains in your garage and is
never driven), and amounts that are the direct result of
your living expenses. Some of the former monthly
obligations, you will only be able to stop when you no
longer own the asset. Other expenditure, such as school
fees, often carry a notice period, so you cannot stop
that expenditure immediately.
1.3.1.
List of ongoing Current Expenditure that cannot
be changed immediately or that are linked to
Assets, as of this Date (mm/dd/yy)
|
Type of
Expenditure |
Owed to
Whom? |
Monthly
Minimum Payment |
|
Notice
Period or Limitations |
When are
payments due? |
Annual
Interest Rate and other Info - Payment Status |
Condo Fees |
Condo Association |
725.00 |
|
Due as long as Condo
owned |
25th each month |
Current |
School Fee |
Private High School |
950.00 |
|
6 Months notice |
30th each
month |
Current |
Car Insurance's (make List) |
Astra Insurance |
360.00 |
|
Due as long as car is
owned |
15th each month |
Current |
Boat Insurance |
Astra Insurance |
240.00 |
|
Due as long as boat is
owned |
25th each month |
Current |
Life Insurance Premium (List each
Insurance) |
Astra Insurance |
300.00 |
|
Can be cancelled with 30
Day notice |
25th each month |
Current |
Storage Fee for Boat at the Boat
Club |
Bertram Marina |
659.00 |
|
Due as long as boat is
owned |
25th each month |
Current |
Total Expenditure on items
that cannot be changed in the Short run (H) |
|
3,234.00 |
- |
- |
- |
- |
You should take note that, since
"Walli" carries mortgages, his property
insurance and property taxes on his primary residence and
condo are normally paid into an escrow which the lender
administers and pays on an annual basis. Therefore they
are not included above and are in the payments made for
the mortgages.
Total Monthly Expenditure
on Liabilities (I) (Add the Totals of the
appropriate Columns of E+H) |
- |
14,179.00 |
|
- |
- |
|
It is likely that your expenditure linked
to assets is rather inflexible in the short run.
1.3.1.
List of monthly Living Expenses, as of this Date
(mm/dd/yy)
|
Type of
Expenditure |
Where do
you spend it? |
Monthly
Payment |
|
|
When are
payments due? |
|
Food,Detergents,
Cleaning for a family of four |
Grocery
Stores |
1,000.00 |
|
|
Evenly
over the month |
|
Dry
Cleaning, Outside Laundry |
|
150.00 |
|
|
Evenly |
|
Gas,
Electricity, Water (incl. condo) |
Public
Utilities |
600.00 |
|
|
30th each
Month |
|
Gas, Car
Maintenance (3 cars) |
|
350.00 |
|
|
Evenly, except for maintenance,
every 9 months |
|
Land line
Phone,Cable TV and DSL Line |
Local Co |
200.00 |
|
|
30th each
Month |
|
Cell
Phones |
Local Co |
150.00 |
|
|
30th each
Month |
|
Medical
Insurance, drugs and co-pay, household insurance |
Blue
Cross, All State or similar |
750.00 |
|
|
30th each
Month |
|
Entertainment,
school spending of kids |
|
500.00 |
|
|
evenly |
|
Miscellaneous,
including pocket money |
|
300.00 |
|
|
evenly |
|
Total Living Expenditure
(K) |
|
4,000.00 |
|
|
|
|
Other current expenditure are the result
of you and your families living expenses. You may be able
to vary this widely, depending on how well you or your
wife can cook. The more you rely on semi prepared foods,
the higher your food bill will be.We will address these
points, and others, in our considerations on the monthly
expenditure budgets.
Total Monthly Expenditure (L) (Add the Totals of the
appropriate Columns of I+K) |
- |
17,979.00 |
|
|
|
|
1.4.
Summary of your Current Finances
To
summarize the current state of your financial position:
We have now learned what your Net Worth
and what your Current Expenditure Level
is
1.4. Summary or Assets and
Liabilities, Net Worth and Monthly Expenses |
Item |
Based on
original Purchase Value |
Based on
latest Conservative Market Value |
Net Worth excluding
Retirement Assets |
46,595.00 |
81,058.00 |
Net Worth including
Retirement Assets |
100,845.00 |
157,578.00 |
Monthly Expenditure |
17,979.00 |
|
Unused Credit |
19,750.00 |
|
Now we can start to look at your income
after you lost your job and how we can trim your
expenditure. For this move to the Future
Income Page.

You may
think that the whole expenditure pattern of
"Walli" is highly exaggerated. It is,
admittedly, on the high side. However, the main purpose
was to show as many of the expenditure items that a
person is likely to have, so that you get a good feel
what has to be included in your calculations. But just to
follow the train of thought to the end, we make a quick
calculation of what "Walli" was likely to have
earned to afford such a lifestyle.
Item |
Amount $ |
Comments |
Annual Expenditure |
215,748.00 |
(12 times $17,979.00) |
Annual Savings and Contribution to
IRA's and 401K |
34,200.00 |
9% of Gross Income |
Federal and State Income Tax |
106,400.00 |
28% of Gross Income |
Annual discretionary Expenditure
on house improvements, down payments on cars,
boat, vacations etc |
23,652.00 |
6.22% of Gross Income |
Approximate Annual Income |
380,000.00 |
(Monthly $26,000 plus an
annual Bonus of $68,000) |
Walli was by no means a poor man and he
lived close to his income level. The annual expenditure
might have been higher then shown since, when not under
stress, how much he spent from his "pocket
money" or for entertainment was probably higher than
shown. That would have decreased his discretionary
spending on vacations and down payments for new
"toys". Depending on where he lived, he may
also have had a slightly lower tax rate, especially if he
lived in a state that does not levy State Income Tax.
We hope
that these financial calculations will help you set up
your own system. Please let us know your comments or
ideas for improvements by sending us an e-mail. Valuable
suggestions will be incorporated in future updates.
You
have not completed your financial plan, there
are tables for future
income, and a weekly/monthly
budget that will help
you.
|