WorthPointe advisors John Chapman and Matt Addington teamed up to create a video that addresses an issue many people are dealing with today — job loss. They discuss financial and non-financial considerations including budgeting, health and life insurance, equity compensation, mentorship, and gaining strength from sharing your situation with family and friends. As they note, no one is alone in this predicament, since more than 10 million people find themselves unemployed because of the coronavirus pandemic.
Hey everyone. I’m John Chapman, partner and financial planner with WorthPointe Wealth Management. I’m joined today by my colleague, Matt Addington, and we’re here to talk specifically about some financial and non-financial action items you could be thinking about if you’re faced with losing your job or if you’ve recently lost your job in response to the coronavirus pandemic. Matt and I were chatting offline about this and we want to be able to really make as big of an impact as we can. For those of you who have lost your job, first of all, our prayers go out to you and your family. This can’t be an easy time for you. And, we want to make sure you’re making smart decisions — after you deal with the emotional impact of everything, you’re doing everything you can to get yourself up and running. Matt, talk to us a little bit about some of the non-financial implications or action items someone can be thinking about if they’re about to lose their job or if they’ve just lost their job in response to coronavirus.
First of all, I would say, you’re not alone. There are 10 million other people in your same situation right now. And so number one, don’t be embarrassed. I mean, tell your friends about it. Definitely tell your spouse about it, right? You need to be in this together. And your friends are going to be people who can be there to help you network, right? You want to make sure you have as many people in your court as possible who can help you get to that next level or that next career path for you.
Yeah. And that can be hard because there could be a sense of shame or embarrassment or maybe even you just got hired six or eight months ago, but now everything’s changed. Maybe you were the last one to join the team and you’re the first one to leave. So that could feel embarrassing. I know of one situation where a friend of mine lost his job and didn’t tell anyone for about a week; he got dressed in his coat and tie, left the house and sat in Starbucks for a week before he could muster up the energy. It’s hard, but you need to tell your spouse and your family.
Yeah. That’s understandable. Another thing I would say is that you want to go ahead and update your resume, right? Update your LinkedIn profile. You know, you want to make sure you’re doing things to help you get to where you want to be. What I like to say is your full-time job is now finding a full-time job, right? So don’t sleep until 10 o’clock and catch up on all your DVR’d series and all that stuff you’re behind. It’s time to get to work. And the new work is finding new work.
Yeah, I think that’s a really good point. Maybe there is a small cooling off period, but you need to be on overdrive and thinking about your future. This is a good chance to push pause; maybe you were in a job and weren’t clear of what the end goal is. So now, whether you like it or not, you kind of are forced to step back and think about why you’re in the industry or sector you’re in. Why you’re in an operations role versus a sales role or vice versa. You can actually do some deep thinking about where you want to be. And I’ve got an idea in regard to that. A non-financial action item is talking to a mentor — maybe someone who’s exactly where you want to be, but ahead of you. Maybe in five years you’d like to mimic that person. Now is a great opportunity to reach out to someone and talk about lots of things, including the struggles they’ve been through and how they’ve gotten to where they are. I think the mentorship opportunities right now are probably really high.
Yeah, I totally agree with that. And I would also say to reach out to the pastor at your church if you’re a part of a congregation, and other friends at your church who can help you. They’ll tell you, first of all, to take a deep breath. It’s gonna be okay. It’s great to have spiritual advisors who can help you along that path as well. I think if you can be at peace inside that’s gonna reflect on the outside and help you not be spastic when you’re looking for everything. You’re going to be calm and make good decisions.
Hmm. Man, it’s hard. It’s hard to be strong when everything in your body might be feeling otherwise. But maybe you just take a walk, do some exercise or pray for a little bit. You’re right. Talking to a pastor if you’re part of a good church or maybe someone from Bible study, I think that’s super important. Absolutely. Matt, let’s switch gears and talk a little bit about some of the financial implications. Where do you even start when you’ve lost a job? Speaking financially, what do you do to make sure you are securing all your finances?
Well, number one, I would say you need to review your budget, right? Most people these days don’t have a budget, right? But it’s important to do that; you really need to understand what those fixed costs are in your monthly expenditures. And again, that might be easier to think about than to actually do because we have a lot of things on auto-pay these days. So, print out some statements, go through the credit card statements and your bank statements. Take a look at all those expenses that come out. And there are gonna be some things you can cut back on. I mean, one of the easiest things to cut back on right now is dining out, right? You can eat at home, which is probably healthier for you, and it’s gonna be less expensive. Entertainment is also something you could cut back. Right now we’re kind of confined to the house, so you’re not going to be going out watching a bunch of movies now, right? Those are a couple of things you could do, but there are other items you can take a look at in your budget to make sure they are progressing accordingly. And maybe some things you could cut out.
No one really likes to budget. I know very few people who actually keep a month by month budget that’s reconciled. So recognizing that, I’ve got two hacks that might be able to assist you. The first is just being realistic about what you spend on a monthly basis. And I want to give an example. Somebody who works a corporate job that makes about a hundred thousand dollars. After you put in money for your 401(k), you pay for your medical premiums and you pay taxes, usually you only ever see around let’s say 60% of your gross pay. And so that’s $60,000 a year, $5,000 a month.
So, when I’m having conversations with prospects or clients, they’ll say their expenses are maybe around $2,000 to $3,000. But somehow the other money is just disappearing. It’s not ending up in their savings account. And that’s because it’s probably going toward discretionary things or maybe it doesn’t happen. Extra expenses don’t happen exactly on a month by month basis, but maybe you go on a trip or there’s a repair on the car. And so, I think the point is, just look at your most recent net paychecks and assume you spend all that money.
And the reason why that’s important is because then you can use that to calculate how much cash you’re going to need after unemployment runs out or to supplement unemployment. You can see what your cash burn is going to be, so to speak, and how many months you have before the “you know what” hits the fan. So I think just looking realistically about what you’re spending is one thing. And one other quick hack I’ve heard from someone else is, if you’ve got auto-pay on a lot of subscription services, call your bank and ask it to send new debit and credit cards. What that does is disrupt the payment system. So those $14 payments here or there might get stopped and you’ll get an email from that service and you can certainly choose to continue. But maybe the disruption of a new card number helps at least bring that to light. So let’s talk a little more about the financial implications. Let’s assume somebody knows what their net income was and what their cash burn is. Are there any other financial considerations they should be thinking about?
Yeah, I think another big thing is looking at filing for unemployment. Right now, the government has done a lot of things to make that easier or to cover more people. You may think, well, I’m self- employed or I do some sporadic work here and there. There are some benefits you can actually apply for now and let’s just say you didn’t qualify for them; it’s not going to hurt you to file for it anyway and take a look at it. I would also say a couple of things here. Number one, you want to do that as quickly as possible. Again, 10 million people are looking to do the same thing. And so, you’re gonna want to do that online right now. They are going to be shut down as far as being able to go into a brick and mortar location. So, go to your state’s Department of Labor website and go ahead and take a look at the unemployment benefits that could be helping you out.
Yeah, a couple of little things I’m thinking about, too. One is just insurance benefits, health insurance and life insurance. With health insurance, you may be able to opt into Cobra and keep some of your existing health insurance coverage. Of course, your premiums are going to be much higher. But that’s something you’ll need to call your benefits team about and make sure you can get set up with your previous insurer, assuming you want to do that or just weighing out where you buy health insurance from. And then the other thing is for life insurance. I think most people when they go through annual enrollment, they just set up for the default amount of life insurance. But if you’re going to be out of work for any period of time, and especially if you’ve got kids at home, now is not the time to be under-insured.
That is especially true if the worst-case scenario happens and you’re no longer with your family and able to support them. So, while I’m not necessarily a life insurance agent, it’s just something I have to as a dad of three. I just have to advocate for people being really vigilant about being on top of their life insurance and not just going with the defaults from their past annual enrollments because this bridge to employment is going to take away whatever you had and you’re gonna be left with potentially a big life insurance gap.
Yeah, that’s a good point. And to add onto your healthcare example, you know, you may think your only option is Cobra. Cobra is, as you said, very expensive. You can do that for up to 18 months, but there are other ideas you could have as well. Number one, if your spouse works, you may think, well it’s not open enrollment. Well this is a qualifying event that would allow you to actually go onto your spouse’s medical coverage, right? And if all else fails, there is the exchange you can go to and potentially get coverage there. And it could potentially be less expensive if your income is significantly reduced. Right? So those are a couple of other ideas on the healthcare side you could take a look at as well.
I want to note a couple of things from an investment standpoint. Maybe we can talk a little bit about retirement accounts, but for me, I know I work with a lot of people who are at private and public companies, but they get some form of equity compensation as part of their overall package. And a couple of important things, which you may hopefully already know, but the first thing is, if you’ve got any type of equity, you need to take action ASAP to ensure you’re getting the most possible coming with you. If you have unexercised options, you only have a 90-day window from the time you leave your employer to actually go and buy or exercise those options. Otherwise, that money can completely evaporate. So you are really under the gun. It’s just an important reminder to really stay on top of that equity compensation. Matt, are there any other things you could think about with retirement or investment accounts after leaving a job?
No, that’s pretty much it. I would say to reach out to your financial planner here at WorthPointe. If you have questions, we’d be happy to take those on a case-by-case basis.
Right on. Well, we’ve covered a ton, both non-financial and financial action items for you. Matt, I appreciate your time and expertise and for the folks who are out there, we’d love to hear from you regardless of your situation. We’re praying your family is healthy and safe and you make it through this t coronavirus pandemic safely. We’ll see you again next time.
Other articles filed under WorthPointe News
November 12, 2020 - The Practice Profile in the September 2000 issue of NAPFA Advisor features WorthPointe, courtesy of an interview with COO Allison Blake. The wide-ranging piece, titled “It’s a great place to be,” showcases the firm’s investment approach and unique corporate culture,...
November 5, 2020 - Financial Advisor magazines’s 2020 RIA Ranking is out—ranking 715 registered investment advisors based on their year-end 2019 assets under management. WorthPointe is found in the asset category of $500 million to less than $1 billion, at nearly $624 million, landing...
October 30, 2020 - By Allison Blake Many financial advisors have their reasons for going solo. They want to maintain control of client relationships, be their own boss, and increase their earning potential. But somewhere along the way, the excitement wears off. Things get...
October 14, 2020 - Our experiences are not only, by definition, our lives; they shape our outlook on our future potential and everything around us. Recent negative experiences can hold us back from achieving those things we want to accomplish in life—sometimes temporarily, or...
August 7, 2020 - By Allison Blake A lot of advisors think they’ll take home more money if they run their own RIA. At surface level, this makes sense. But after having worked with hundreds of advisors over the past 13 years, I can...
- Educate Yourself Before Using Stop-Loss
- Advisory Firm Myths–Busted: What Percentage Of Revenue Do Top Advisors Really Take Home?