The following guest post was submitted by Neal Frankle, CFP. Check out the footer of this post for more information on Neal, and his website.
Lots of people have been laid-off recently. As a result, they’re looking for any kind of work they can find. I respect people who are willing to do whatever they can to support themselves and their family. But sometimes the “cure” compounds the problem. Let me explain by way of example.
Mike was a writer and like many in his field, he was laid off several months ago. Jenny, his wife became the sole support for the family. Mike looked for work every day but after 4 months still came up empty handed. The pressure was mounting – financially and emotionally. The couple was facing the real possibility of losing their home.
Finally, Jenny confronted Mike and made it very clear that she expected him to do whatever it took to make money – regardless of what work it was or where he found it.
Mike understood Jenny. Later that day, he saw a “help wanted” sign at the local book store and applied for a full-time job. He wanted to do whatever he could to bring home as much money as possible. Mike didn’t get the full-time gig but was offered some hours on the weekend. That was the best thing that could have happened for Mike and Jenny.
Some questions you might be asking yourself about now might include:
“Does Neal have something against Mike?” or “Is Neal out of his mind?” or “Does Neal have something against bookstores?” The answer is “no” to all three questions.
It would have been …..eh……”silly”….. for Mike to take the full-time job and I’ll explain why.
The bookstore was offering him less than $12 per hour. So even if he worked full-time, he would not have earned enough to hold on to the house. The $12 hour job was a financial placebo for Jenny. And to make matters worse, he would have been stuck in that job forever because he wouldn’t have the time to look for better opportunities.
Here’s the approach I suggest if you are out of work and facing similar difficulties:
- Don’t panic.
If you do, you’ll end up making decisions out of fear and ones you’ll likely soon regret. This is the time when you need all your genius brain power. Cool down.
- Be rational & get the facts.
How much money does it cost your family to live each month? Do you have any savings? What else can you cut to reduce your cost of living? (Hint: if its not food, shelter or medical expenses, it can be cut.) How much longer can you hold out? How likely is it that you’ll find work in your own profession?
When Mike and Jenny did this, they concluded that they had enough money to hold on to the house for another 5 months. They figured that even if Mike took the low-paying job, they would only be able to hold on to the house for 3 additional months. So they had to decide between:
a) Taking a chance that Mike would find work in his area of expertise and therefore creating the possibility that they might hold on to their home. If not, they’d be out in 5 months.
b) Working at the bookstore and almost surely lose their home in 8 months.
- Make a decision and execute it. The couple decided that Mike would work on the weekends at the bookstore. This allowed him to earn some money while at the same time, have the opportunity to look for better paying jobs during the week. They understood that they had nothing to lose by going this route – and they were right. If Mike doesn’t find a higher paying job in 5 months, he’ll go back to the bookstore or pizza parlor or whatever and take any and all work he can.
When you are facing extreme financial pressure, don’t grasp at the first apparent solution. Take the time to examine all the facts and try to think outside the box. You may find that the best solution is not always the most apparent.
Have you ever been in a similar situation? Do you think that Mike should have taken any job possible?
About the author: Neal Frankle found himself in a financially fragile situation at the age of 17. Both his parents passed away while he was still in high school, leaving behind a small insurance settlement. Neal sought out a financial advisor to help him invest his nest egg so that it would help put him through college. Instead, the advisor charted a self-serving course and was on the verge of burning through the money when Neal realized what was happened and fired him just in time to avoid losing everything.
The experience had a deep impact on Neal and formed in him a lifelong desire to help people learn to make smart financial decisions. Today, with more than twenty-five years of experience in the financial services industry, Neal is an author and avid blogger. Subscribe to his blog at www.wealthpilgrim.com.