STRATEGY have a war chest
Dear fellow turkey,
This advice is for all turkeys, both those earning and those seeking. Probably more aimed at the earning ones, lest they fall into complacency.
Remember that one of the principle tenets of the Turkey faith is that you are only sure of the last paycheck you cashed.
With the bankruptcy of <insert your favorite company>, you secure do you think the highly paid pilots are? What about the and suppliers?
How about the casino workers in Mississippi and NOLA after Katrina?
Last paycheck you cashed is yours; everyone in the future is speculation.
Uncertainty abounds. Back when I took my first turn at unemployment, I got a little more than a year’s pay to leave and was “out” 11 days. Five of those days were waiting for the drug and finger print check, Four of them were weekends. Total elapsed job search time time from the “offer to get out” to “first day on the new job” was 23 days. I’ve never matched that since. Even in a voluntary change.
Somewhere between Lucht’s book, my own thinking, reading “Parachute”, and counseling turkeys, I have come up with my own copyrighted, trademarked, super-secret secret formula for estimating what you need as a war chest. Personally, I have a meeting with myself on the first Sunday of every month as the CFO of “Me, myself, and I Unincorporated” to review my financials and the first item on the agenda is “Expectations”. I review quickly the factors in the computation and then look at the bank statement for my war chest account. When first in the earning phase, I try to as quickly as possible rebuild the account to required guesstimate. When in the seeking phase, I monitor closely the draw down from that reserve. It has served me well thru four cycles. It certainly takes the stress out of the cycles. Any turkey that doesn’t think there will be cycles has not been paying attention during the “Church of the Big Turkey” sermons. As an aside, the only reasons for not having a reserve is maybe that you work for the government. But even that is not assured, a la Brown of FEMA.
Now to the formula.
First I have to swear you to secrecy. Secrecy because if you tell a non-believer, they will look at you like you have two heads. A non-believer doesn’t believe that they are a turkey.
COMPONENT #1: YOUR BURN RATE
My first component is based on how much you spend. You should be able to look at your checkbook and see your net pay go into it and your expenses come out of it. Hopefully, you are not spending more than you earn. That’s a different more serious problem. You need to listen to Suzzie Orman or Doctor Phil in that case. That’s your basic burn rate. How much money you burn each month. Yes, I know you can cut it but that future cutting is your error margin for now. You may want to cut to build up your war chest, increase your savings, or just want to stop wasting it.
As special note about medical insurance coverage, you need it. The worst disasters occur when you let your coverage lapse and someone gets sick. Assuming that you don’t have your own medical coverage, independent of your employment, you need to look at your pay stub for how much you pay for it now. You have to add that into your burn rate.
Also, you’ll have to find out what your COBRA amount is from your employer. Usually, that is much more that your regular rate. Assuming that you get a severance, your employer usually gives you some basic coverage for a short period of time (i.e., a month or two. Not out of generosity, but their insurer makes them pay by quarter.). They then offer you, because Federal law requires it, the opportunity to continue it at their cost (Or at least that is what they are supposed to do. I’m not so sure that there isn’t some markup in these rates.) You have to have it; so you have plan for it. I have seen COBRA offerings in excess of 1k$ per month. Be ready to swallow hard and take it.
And, you’ll have to find out how much a medical insurance policy would cost you without a group. In many cases, these are BARGAINS. I know one turkey who has three policies he has picked up thru his umbrella consulting society, his church, and aarp. Keep looking around and if you’re offered one, you may want to take it.
If you feel the urge to skimp, remember the last explanation of benefits you got when someone was real sick. If you don’t have one, I’ll send you one of mine from when Frau was sick and the bill was over 250k$. Also, remember the phrase preexisting condition! It means if some one gets something while uninsured, that’s exclude from coverage when you get insurance. Even a bare bones policy, keeps this ogre at bay.
So, add to your basic burn rate the cost of medical insurance and anything else on your pay stub that you would have to pay when unemployed. Think loans that get directly deducted from your paycheck. Convenient but easy to forget.
That is your run rate. It represents the rough amount of spending that will occur when you are fired, tossed out on your keister, unceremoniously run out on a rail … … ON MONDAY MORNING!
COMPONENT #2: HOW HOT IS YOUR SKILL?
My first component is a measure of how much you are earning. It’s the easiest to come up with and the easiest to understand. On the theory, that, for example, the burger flipper at MickyD’s doesn’t have to worry too much about finding another burger flipping job. However, a CxO has to recognize that there are not a lot of C anything jobs just waiting for the right candidate. So I like to develop a number that represents the overall market for your particular skill. If I was considering CICS programmer and a C Language programmer, I say that the CICS person would wait 3 times as long as the C person in the queue. So I would award the CICS programmer a score of 3 and the C programmer a 1. You’ll see why later. If you can’t judge it, use the net to develop a feel for it.
COMPONENT #2: HOW HOT IS YOUR INDUSTRY?
On the other hand, in the late 70’s, my cousin was a highly paid nuclear engineer. He was a leader in his industry. Gave talks, wrote articles, was in demand. He used to tell me about all the offers he was made. Chernobyl, TMI, and the anti-nuke wave just ended his industry. He turned out the lights on his division after a decade of ever downward spiral. He had to drop back and regroup. His skills in making buildings to house a controlled bomb where transferable to making building to hold unruly kids (i.e., skools for the government). But he never made as much money or was as “hot” as he was. He’s happy but it taught me that the industry can cycle as well. SO you have to assign a multiplier to your industry. Government workers get a 1; Wall Street workers get a 3; everyone else is in the middle somewhere.
COMPONENT #4: HOW LONG WILL YOU BE SEEKING
I have two ways that you can come up with this number: you can guess or you can calculate it. Guessers can pick a number. You might even be right. I prefer to calculate. Take your salary and divide by 10k$. Throw away the fractions. Multiply it by how hot or dead is the market. During the 911 doldrums, I was telling people 4. During the dot com bubble, I was giving people .25 or .5 (it was absurd.) Right now I’d say it’s a 2. Talk to any headhunter, recruiter, or anyone connected to the industry and they’ll tell you how hot or cold it is. Multiply the two numbers and that’s you basic replacement factor.
COMPONENT #5: HOW OLD ARE YOU?
Recognizing that there is age discrimination out there, I include a special factor to accommodate that. Less than 40 is 1; 41 to 49 is 2; 50 to 57 is 3; 57 and up is 4. Sad fact of life. Age is not respected. Wisdom is not valued. I can recite all the reasons why it isn’t true. But facts is facts. And us turkeys are factual. You get fired after 57 and you may never work again.
Multiple the component numbers and that is your war chest. Stunning. Yup.
In my particular case: C2=2; C3=1; C4=17; C5=4
So my score of 136 tells me that it might take me 11 years to get back it. Yup. Retirement planning.
I just did this exercise with a younger turkey and they were ASTONISHED that they (1*1*12*1) might be out for a year!
I have used this formula with people. They didn’t believe the results. One turkey (2*2*14*4) told me that my projection of 224 months was absurd. And that he’d be in less than a year. He JUST got in last month after a 7 YEAR SEARCH! Yup, my formula was wrong but he lost his house and all his retirement savings. Talk about being pig headed.
Your mileage can and will vary. But, I’ll tell you that personally with a suitable war chest, I have never been stress when I’ve been out.
I hope no one is ever out. But if you are, this formula should make it less painful.
I’m always interested in feedback.