Adjusting Our “New Financial Advice” to Include Unemployment

The Matterhorn from Fantasyland

Continuing the idea that we need a new kind of financial advice:

The “old” financial advice model, by which I also mean the current financial advice model, presumes that you’re going to have a job at all times. Technically, it knows that you aren’t going to have a job at all times, but it brushes that uncomfortable truth into the corner by quickly shouting something about a three-to-six-month emergency fund.

And, of course, if you don’t have a job, you are advised to immediately trot on down to the nearest Walmart, Starbucks, or nurse’s aide training program.

Never mind that these jobs are not known for their long-term stability, and never mind the fact that you can’t get a coffee shop job just by asking. A link was bouncing around the internet yesterday about 1,701 people applying for eight Costa Coffee jobs (I only now realized that the story is a year old but probably still makes its point), and the last time I was in a coffee shop a man literally walked in, shouted “is anyone in this industry actually hiring?” and then argued with the barista before stomping out.

And here’s another set of statistics to consider, from Fred Clark writing at Patheos:

What unemployment means is that there are no available jobs. It means that X number of people are being denied work. The unemployed are not those who refuse work, or who do not seek work, or even those with poor “job-seeking” skills. The unemployed are that percentage of the population whose right to earn a living is being denied to them. The 7 percent or so unemployment rate we have had in the years following the crisis year of the Great Recession refers to the percentage of the work-force for which no jobs exist to seek, to find or to fill.

This is why the better measure of unemployment is the ratio of job-seekers to job openings. That ratio has not sunk below 3 to 1 since the Great Recession. That means that if in a single miraculous instant, every mismatch of geography, skill-set and pay-scale were met and every job opening were filled at once, then two-thirds of our unemployed would remain unemployed. And at that point there would be no reason for any of them to send out résumés, brush up on their interview skills, or do any of that other victim-blaming make-work we expect them to do, unpaid, until such time as someone deigns to allow them to earn a living again.

So any kind of new financial advice has to include the expectation of unemployment. Either it’s going to be unemployment from not being able to find work, or it’s going to be unemployment while taking care of a child, parent, or other loved one.

We’re going to be unemployed, and it’s not going to be for some three months while we burn down our emergency fund before skipping off to start a new life at Starbucks. That means we have to start handing out some new financial advice.

What is this new financial advice? This is a serious question, because I don’t know the answer. “Woooo savings” makes sense, but a lot of us are already living modest paycheck-to-paycheck lives. You may have seen that “Switzerland wants to offer all of its citizens $33K a year regardless of employment status” thing bopping around on Tumblr, but, while that would solve the “financial advice” problem, the Swiss Basic Income plan is nowhere near reality yet (and also it would only apply to the Swiss).

What advice do you think we should include, when we’re discussing planning our finances to include periods of unemployment?

Photo: Justin Ennis

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26 Comments / Post A Comment

Samantha (#6,738)

This is the kind of thing I worry about pretty frequently – not that I won’t ever get a job that pays well, but that I won’t have a job that pays well for long enough, and that the spaces between jobs will be too long.
What are people supposed to do, then? Just save as much as you can and hope for the best?

HelloTheFuture (#5,275)

@Samantha Isn’t this why the term “safety net” was invented? Or “it takes a village?” Or “I get by with a little help from my friends?” I have no actual advice, I am just throwing out catchphrases and maybe implying that we should have a system by which we help each other.

chic noir (#713)

@HelloTheFuture – ” getting by with help from friends” is a form of Socialism. I suspect people from small families and “only children” will depend upon friends to see them over ruff patches.

Whats really scary is living 90+ years with no living family and/or all of your friends are dead and a bad case of dementia.

People in my family frequently live past 90. This sort of thinking keeps me up at night.

NoName (#3,509)

@chic noir Wow, me too. I remember once looking at census figures of how many women over the age of 75 live alone and it was not reassuring. On the other hand, my 80-year-old widowed aunt got married to a lovely widower and is living very happily.

Lily Rowan (#70)

@chic noir Yeah, I’m a single, only child in my 40s. I worry about what will happen in my old age. But maybe I’ll marry someone with kids before that! Or maybe I’ll get hit by a bus.

Samantha (#6,738)

@chic noir THIS. My great-grandmother is 100, and while she’s lived to be older than most of my family members, everyone else lives to be at least 80. She lives with my parents, but if you never have kids because you can never really afford them…who will take care of you when you’re super old?

Samantha (#6,738)

@HelloTheFuture I guess that’s the idea of the safety net, but it doesn’t seem like it works that well in real life. Maybe this is the wrong view to have, but I feel like as a young, able bodied, educated person…I am not a person who should be relying on the social safety net very much.

Stina (#686)

@Lily Rowan I’m in my 40′s too and have a family with an very, long lifespan on average while my husband’s has a shorter average. So I’ll be available for a “Golden Girls” type arrangement if you’re up for it.

Lily Rowan (#70)

@Stina EXCELLENT.

szajic (#1,811)

I think just getting it into one’s head that unemployment will very likely happen at some point is important. When you have a job, particularly if it’s your first job, it’s easy to assume it will last forever, if not get more lucrative as you advance. But those are risky assumptions. If you lose your job, when you find a new one it’s usually at a significantly lower salary. Consider: how would you manage your finances if this year is your highest income year? (We all hope it isn’t, but if you plan this way and things go well, you’ll have extra savings for retirement/college/your parents/etc.)

So: savings, yes. Let your needs (plus good experiences) guide your budget, not your salary. Career development: get good at other things other than the direct thing you do (if possible, on your current job, but extracurricular is OK, too). Also consider other options – look around for interesting jobs that might fit you regularly.

VAinVA (#6,920)

@szajic This is great. Financial advice should instruct people to really research the kinds of jobs for which they’re qualified AND which they’re likely to get in their area. Keep poking around the job market and looking at salaries on glassdoor.com. Budget as if you’re earning the salary of one of the lower-paid jobs, and funnel your leftover money to an account that’s not easily linked to your checking. If you’re being underpaid, you 1) save at least 20% as usual, and 2) apply for a better-paid job! And if you lose your job, your emergency fund is in that other account.

DebtOrAlive (#5,233)

For me it comes down to Do Not. As In,

Do Not own a car.
Do Not get injured.
Do Not live in neighborhoods white people feel comfortable living.
Do Not have children.
Do Not ever live with fewer than two roommates.
Do Not pay for anything before debts, rent, & utilities.
Do Not expect to live more than a lower middle class life, ever, even if I eventually make 6 figures.

chic noir (#713)

@DebtOrAlive #3 can go either way.

1.Find a “underprivledge” neighborhood with cheap property.
2.Save like hell.
3.One day while walking down the street, you may see a 20 something surban White woman in a vintage poka dot dress walking her pit bull.

4. Run like hell to the bank for a home loan(avoid ARMS)

5. Get roommates if you haven’t already done so.

6. Go to the local supermarket. Check out the cheese aisle. Do you find a big ball of cheese that looks like glue floating around in dishwater???

If so… You have arrived son!

Your welcome :)

samburger (#5,489)

@DebtOrAlive Yep. Keep expenses low. The lower your expenses are, the easier it is to save that magical 3-6 months living expenses (not that it’s easy to begin with, though).

cjm (#3,397)

I think the advice should of course include saving, for two reasons. Yes, duh, you can use that money to live. Second, saving means you aren’t currently including that money in what you spend to live. So, if you can “save” 20% of your income (I’ll include 401K, additional money sent to pay down debt), you are living on 80% of your salary. If you get a 20% drop in salary, you now aren’t saving, but at least you can live!

Second, I think the financial advice needs to include bankruptcy! I know student loans aren’t included, and your probably don’t want to lose your car/ house. But seriously, I hear about too many people trying to Dave Ramsey their way out of $30,000 of credit card and medical debt when they lose their job and have an income of $20,000. If you lose your job, and you have more than one years income in credit card debt, declare bankruptcy.

Third, financial advice of side gigs. Man, I hate the concept of side gigs, and the “gig economy”. But, if you have $200 a month from your babysitting gig, that can make a job loss a lot easier. Maybe you can ramp it up to $400, and that plus savings + unemployment insurance might get you through 2 years instead of 3 months.

shallowpate (#1,701)

@cjm It’s interesting how you pair side-gig income with unemployment insurance. Does side gig implicitly mean under-the-table gig? Is that a generally accepted, if unacknowledged, part of the economy now?

potatopotato (#5,255)

@shallowpate: Under the table? Depends on how honest you want to be with the Unemployment people. You’re supposed to report any and all income you receive on a regular basis when you “reapply” — in PA I had to check in every 2 weeks to tell them that yes, I was still looking for and availble for work, and yes, I still needed them to send me a check. I worked a legit part time job and reported all of it, and it stretched my UC to last almost a year. I also reported the 8-months-late check my previous employer sent me for 2 weeks’ vaca I had earned, which nearly got me booted from UC entirely. But I babysat for a kid maybe twice in that time ($200?) and did a photo gig under the table ($500) and didn’t report that, even though I was surely supposed to. When I do my annual taxes I’ve never wanted to report myself as an independent contractor for the <$1000 I make a year doing various photo and house sitting jobs, and I wasn’t about to start at a time when I was desperate to make ends meet without eating all of my savings.

cjm (#3,397)

@shallowpate I think it is for most people, but I guess it is true that giving advice about lying is probably not going to become mainstream. But, maybe it’s working at a real job part time, which would be above the table and then could expand if you find your main gig gone. As @potatopotato said, it could either extend the time which you can get unemployment before you reach the cap or it could be some income once you get cut off from unemployment.

shallowpate (#1,701)

If we assume everyone will lose a job at some point, and probably more than once, then we probably also ought to assume that 401(k)s are really just emergency funds. Specifically, emergency funds with all sorts of complicated penalties and taxes attached. Which raised the question of the wisdom of saving via 401(k)s.

HelloTheFuture (#5,275)

@shallowpate yeah… we do often treat our 401(k)s like emergency funds, even though that is also like saying goodbye to one of the few remaining decent sources of compound interest. :(

Stina (#686)

@shallowpate Roth IRA’s can be a better option because you can take the principle out at any time (but not interest earned) without penalty.

Stina (#686)

@Stina Boo! Meant “principal”

shallowpate (#1,701)

@Stina See, now that’s good New Financial Advice!

potatopotato (#5,255)

Not directly financial in nature, and not an option for everybody, but I would advise social networking for the sake of having a friendly safety net. My mom is part of a church family, and if she were to fall on tough times those people would rush to her aid. I’m not religious, but I’ve found my own similar communities in other ways — my knitting group, running group, social club — and those were the people who helped me move my shit to my boyfriend’s house when I was laid off and broke my lease. It seems to me that fewer people turn to and become part of church families anymore, and for those of us who don’t, we need other resources to build community so we can take care of each other.

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