Friday, February 8, 2013

How getting laid off was the best thing for my finances

After I graduated college, I began my career as a engineer in training for a mid-size civil engineering firm and made a nice $50k per year.  I didn't really care too much about money and personal finance at the time, although I did begin to get interested in the stock market mainly through investing with the 401k.  After I started trying to learn more about the market, I still didn't think I knew enough about investing to try and go on my own so I stuck with just using the 401k.

The Layoff Comes

January 2009 rolled around and I was told that I was being laid off, what a great late Christmas and birthday present for me.  I was pretty bitter at first after the layoff for 2 reasons.  One, less than a month prior, they had a pretty big Christmas party and now they're laying off about 20 employees.  And two, they made me go into work that day only to then lay me off at about 9 that morning.  I would have much rather they just done it the day before so I wouldn't have had to get up and drive to a place that no longer wanted me.

The first month or so of being out of work, I was pretty bitter and frustrated.  But knowing how bad the situation was, I was grateful that I had a huge emergency fund, even though I wasn't saving it up for that in the first place.  Luckily, I was never much of a spender and over the 1.5 years that I worked there I had saved up about $26k in my savings account.  Considering that I had only grossed approximately $76,250 that was a pretty considerable chunk of savings.

Learning about personal finance:

I have to admit that my first real introduction to personal finance through listening to Dave Ramsey's radio show.  His message was pretty straight-forward, NO DEBT!  It made perfect sense.  Why would I want to pay someone else with my hard-earned money just because I wanted to get something a little bit earlier.  I then started researching a little bit more about personal finance and found The Simple Dollar.  After following along with Trent for several months, I began thirsting for more knowledge on the subject of personal finance and searched for other blogs and books on the matter.  This put me on the path towards at least having control of my finances.  I still expected that I'd be working til 65 or maybe be able to call it quits early at the ripe old age of 60.

Daily Life while Laid Off:

Until about the 8 month mark of being unemployed I still tried to apply for just about every job that was remotely related to what I was doing before.  I went on several interviews where I thought I might have a real shot at getting the position, only to be let down without so much as a phone call saying they were going with someone else.  That was the most frustrating part.  I got to the point where I got annoyed enough with searching for a job and having no luck that I figured I'd take some time off to focus on myself.

I started working out every day and took our dog on daily walks.  I ended up getting into the best shape of my life when it was all said and done.  Of course, this just went on to reinforce that determination and staying focused will get you the results you want.  Once a week I usually would drive down to go see my grandparents and spend time with them and help them out around their house.  They aren't spring chickens by any means with my grandmother at 78 and grandfather turning 91 in February.  While at my grandparents, I would go do work in the garden and even started a small potted garden at my own house.  One of the other things I really focused on that went hand in hand with exercising was cooking.  I never knew much about cooking before that but by cooking 3 meals a day I now have the knowledge and confidence to cook just about any meal, or at least try it out once.

It was great getting to wake up every day and not have to fight traffic or deal with some new deadline from my boss.

Focusing on Reaching Early Financial Independence:

My extended unemployment gave me my first glimpse of what early financial independence could be.  But I had no idea how to get there.  So it was back to the internet to see if other people had done it or were working towards it.  The 3 biggest sites that I came across were all at different points and took different paths to get there but came with a pretty consistent theme of save as much as you can while spending only on things that you absolutely must have, food, or that truly enrich your life.  Those 3 sites were Early Retirement Extreme, Mr. Money Mustache, and Dividend Mantra.  Each one brought something else to the table.  ERE was already living in FI without having to go work.  He showed me that yes it actually is possible.  Their expenses are ridiculously low, which makes sense.  Why buy a new shiny object when I could put my money to work?  MMM taught me to quit making excuses and if I want to go get it I can and to just do it already.  DM was one of the big reasons that I chose DG investing.  It was another one of those situations where the light bulb just kind of got switched on.  I was never a big fan of withdrawing the principal of my savings to pay for my expenses because the market is too volatile.  If the market went up by 8% every year then it'd be easy to do, but in reality those years are -12% -10% and + 25% that works out to an 8% average (note I have no idea what those gain/losses will give you).

Where I'm at now:

It's now 2013 and I've made so much progress towards FI.  During my layoff, I couldn't put into practice many of the personal finance principals I had learned along the way, but it set me up for when I did find another job to start saving like crazy.  In July 2010 I started my new job after 1.5 years of being unemployed.  I was lucky to get into one of the few industries that was booming at the time, the oil field.  I'm now 2.5 years into this new job and it's great.  There's no deadlines because it's all based off of just drilling the well.  Sometimes it's 10 days sometimes 60.  I don't have to deal with office politics at all and I'm essentially my own boss when I'm working because our office has very little oversight on day to day operations in the field. On most days I have 12 hours to be able to devote to other things than my job, which most of it is towards learning about things that interest me, the stock market and developing this blog.

What I learned from my layoff:

The biggest thing I learned from being laid off was how little I need to spend to be able to still enjoy my life.  Over the course of 1.5 years I did go through my $26k in savings, however that's over a 18 month period, 547 days. The layoff was actually one of the happiest times in my life because I didn't have to do what anyone else wanted me to do and could focus on so many other things.

I wouldn't suggest that anyone try to get laid off in hopes of having some lesson taught to them, but in my case it worked out wonderfully.  The lay off came as quite a big surprise, but gave me a taste of what else there is in life besides getting up at 5:30 every day to go work for someone that could just decide one day that they no longer needed me.  There's much more important things in life than working a 9-5 til 65.  Why waste at least 1/3 of your day every day during the prime years of your life working?  

In the 2.5 years of this new adventure, I've grown my net worth from -$1,663.30 to +$178,667.34.  That's just a crazy amount of growth in that short time frame.  I now have a goal of reaching FI by 40 and a plan in place to get there.  Although I should hit it much earlier than 40 and then it'll be a matter of how much cushion my wife and I are comfortable with.  I had nothing invested in a taxable account 2.5 years ago and now it's up to around $82,000 with an income stream that's growing every month.

What led you to focus on dividend growth investing or pursuing early financial independence?

29 comments:

  1. Unemployment can be a strong motivator. I know for me, it was one more piece in understanding that there is so much more than working for "the man". Not quite as far along on my journey, I have already seen the benefits of embracing a lifestyle that supports saving combined with sound investing.

    Keep up the good work!

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    1. The progress is usually so quick at first. The real test is after a year or two and you're just kind of grinding away at it. Being laid off and having an extended unemployment period really was a great motivator to strive to reach early financial independence. Best of luck on your own path!

      Thanks for stopping by!

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  2. Great post. I got laid off in 2009 as well. I didn't have a big emergency fund to fall back on like you did but it still was an eye opening experience. I was happier being unemployed than I ever was at my job, thats why when I found work again I really made it a point to start saving so that I could get hopefully get out before I was too old to enjoy the time.

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    1. 1st Million,

      Thanks. Late 2008 and 2009 was a horrible time but I wouldn't change what happened because I'll be free so much earlier than where I was planning before. It's strange how not having to go to work, we were both much happier. I had so much time to be able to enjoy things. The only thing I wish I had done more was volunteer, but that will be a bigger part of my life after I reach FI.

      Thanks for stopping by!

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  3. Fear of being laid off has been my drive towards financial independence. Had there never been a recession and my continued and/or future employment never been put into jeopardy, I would probably have just assumed that I'd work until age 65 or so, just like everyone else.

    Even if I reach FI, I'll still probably work for the mental stimulation and the spending money. My FI goal at the moment is just enough to pay the basic bills. My own personal unemployment insurance if you will. Not enough to have a glamorous exciting lifestyle. Maybe that will be phase 2.

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    1. MFIJ,

      That's exactly how I was. I was saving a good amount towards retirement, if I remember correctly between 17% and 25% to the 401k including the company match. But I never really had an idea about getting out earlier until I was laid off.

      Reaching FI will be a great day. I might still work but it won't be at the job that I currently have. Once we get closer to FI, my wife and I will have to figure out what kind of cushion we want and how much extra spending money above our expenses we're comfortable with. From the conversations we've already had, she'll probably still work. She works at a Title 1 (low economic) school and just loves the kids because she came from that background and feels that she can do so much good there.

      Thanks for stopping by!

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  4. Pursuit,

    First, thanks so much for the kind compliment. I'm glad my blog was one of the motivating forces for you. You've clearly made tremendous progress and I fully expect you to reach FI way before me. You're doing fantastic!

    I was laid off as well back in early 2009. Mine came around in March of that year. I was working for a dealership in Michigan doing the same thing I was doing now. I wasn't making good money and I was the last guy in line in a busy service department. That summer I spent a lot of time reflecting on how it was that I was in that situation and how I could improve on it in the future. I decided to move to Florida in June of 2009 and decided to put myself on the right path. I found a room for rent in Clearwater and found a job within one month of aggressive job hunting. I started saving right from the get-go as I knew that things needed to change. I then started on the path to FI in early 2010.

    I suppose my lay-off also put me on the right path. Consider us enlightened, I suppose! :)

    Great progress so far. It's good to know that you're probably going to reach FI in your mid-30's and be a case study. You'll have to let me know how it feels "on the other side"...although I plan to not be far behind you. Keep it up!

    Best wishes.

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    1. DM,

      I didn't really like the idea of withdrawing 4% and adjusting for inflation. Something just didn't jive with that because the markets are anything but steady. Once I happened to find your blog and DGI it finally clicked on how to go about this.

      It's a shame that we had to go through a layoff to find this path, but I wouldn't change it except for maybe a shorter unemployment so my savings didn't get used up. Other than that, I'm not complaining about the layoff.

      I hope to be able to continue on the path and reach FI in my mid-30's but there's a lot of changes that will be coming that will alter our spending. For one, my wife and I are probably going to start trying to have a child this summer and once the baby comes along priorities get shifted. I'm still not sure whether I'd rather be mortgage free or not before calling it quits, so it might be an extra year of working to pay for a house with cash or at least a good portion of the house.

      Thanks for stopping by and keep up the great work yourself!

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    2. DM, I'm excited to find your site. I enjoy the early retirement niche and have some related articles myself.

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  5. After reviewing all the comments above, it seems like most of the people get laid off in 2009 just like me. I used to work in multinational company but for last 2 months I am unemployed. I have given my 10 years to this company and I have learned my lessons. Anyway, I am planning to get married after getting a good job, see if is changes anything. I am glad that you shared your knowledge.

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    1. The lack of control over my own employment really hit home after getting laid off. Knowing that any day I could wake up and no longer have a job really hit home when I was laid off. Best of luck with getting a new job and on the marriage.

      Thanks for stopping by!

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  6. Wow that's a great story. I've never been laid off, but whenever I've been unemployed, I've found it helpful to stick to some kind of routine, whether it is job applications or working out and taking care of yourself and your family, as you did.

    Great job so far, looking forward to hearing more!

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    1. CF,

      A routine was definitely what got me through. The first several months it was filled with applications and fine tuning the resume. After that I started focusing on my health with cooking and exercising. My attitude and happiness improved so much once I stopped focusing on finding the next job, especially since that was a huge source of frustration for me due to the constant rejection.

      Thanks for stopping by!

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  7. Thanks for sharing your story. It should be a motivation to those who are just starting out in their financial education/journey. All to often I hear people make the excuse that investing is too difficult for them to understand. You have proven the exact opposite, as you said in your post all it takes is hard work, dedication, and focus. Keep up the great work!

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    1. Marvin,

      No problem. I hope it helps to motivate those that find themselves in a similar situation I was in or are essentially starting from scratch. I think most people just assume that in order to invest you have to have some very difficult to execute plan, but the simplest strategies are usually the best. It doesn't take much to grasp the main concepts of anything as long as you commit to learning about it for a while. I wouldn't call myself an expert by any means, but I have no problem sharing what I've learned with anyone that's interested and point them to other resources.

      Thanks for stopping by!

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  8. Thanks for sharing your story. It's really good that you figured it out early. A lot of people get to their 40s before finding out about the whole unemployment thing. I'm a big fan of all those sites you listed. I haven't been to ERE for a while though. He stop updating right?

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    1. Retire by 40,

      I got a little bit later start than I would have liked, knowing what I know now, but I'm nowhere near in my 40s so I'm ahead of the game. I stopped checking ERE as well because he went back to work and stopped updating. I think there's a post every now and then but it's not on a very regular basis. It's still a great resource for anyone interested in early retirement/FI.

      Thanks for stopping by!

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  9. I know from personal experience and friends that it is much more difficult in this situation if you have a spouse and/or kids. You are probably aware of that, but the pressure is really on, not for you to discover yourself, learn more and be at peace but to simply get back on the job. That said, it does force one to really manage their time properly between flooding the job boards, cold calling and go into interviews. By putting in all of that effort there is often time and satisfaction to do some of those things like visiting family, working out, gardening, etc.

    The worst layoff though is for university and college grads. The majority are laid off the minute they graduate. They are sitting on tons of debt from student loans and credit cards and the majority of industries are not actively hiring. Those that are, are often 100% commission based. Of course, I don't feel they are entitled to anything or that they are necessarily the hardest working, but they are entering a job market rarely seen.

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    1. Scott,

      Having a spouse or kids that depend on you is a big game changer during a lay off. I didn't have any children but was dating my now wife during my lay off. My wife was and still is teaching so she had her own income. If I had someone that was truly dependent on my income, then I would have had no problem going and flipping burgers to have any kind of income.

      Honestly if it's at all possible I think you need to take the time out to visit family or something else. When it was rejection after rejection your spirit gets really dampened, at least mine did. My attitude completely changed when I wasn't 110% focused on finding another job.

      I agree that for some recent graduates, timing just plain sucks. While student loan debt is excusable, there's no reason for them to have any credit card debt. Another issue I have is that there's a good chunk of them that probably didn't forecast out their potential earnings for their career versus the debt load that they took on. This speaks more to the lack of any kind of financial education whether from their home or school and is unfortunately a state that we currently live in. I hope that it changes and I've even contemplated taking up teaching economics and throwing in personal finance after I reach FI. But we'll see if that happens because that would be a huge step up in my stress level.

      Thanks for stopping by!

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  10. PIP,

    What a time 2009 was! My company went through three rounds of layoffs that year and it was very concerning. It was so concerning I decided to start my site then.

    I write a lot about Retirement and early retirement as well that you might find interesting. I took the leap of faith last year after 13 consecutive years of work, and you're right, I don't need much to be happy at all.

    Unemployment, self-employment, early retirement is pretty nice if one is prepared.

    Best,

    Sam

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    1. Sam,

      2009 sure was crazy. I hated that I got laid off but I wouldn't have changed it. Before I had my finances under control, but I never really paid attention to it. And now I'm much more focused and even without keeping track daily my expenses don't fluctuate that much. Habits sure are hard to break, whether good or bad.

      I've read several of your posts on retirement/early retirement. Well, actually just a lot of your posts in general. Once your basics are covered, spending more doesn't add as much to your happiness level. I know a few people that gross $300-400k and are so much further behind on their finances. I'm hoping to actually transition to that side of the oilfield to increase my income and widen my gap further cutting down on the time to early FI or the gap available during early retirement.

      Thanks for stopping by!

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  11. Great post to read and encouraging comments above. I got laid off yesterday from my job but I am looking at the positives in it so I can move forward. Thinking about setting up on my own for now as the role I had was essentially a sales guy in a middleman type business.

    FI was my plan before I got laid off as well so I don't want it to stop now. Income generating investments seems to be a minefield so I am glad I found this post and will trawl through the above mentioned blogs to find the nuggets of info that will be useful.

    Well done to all of you above and lets keep going towards the old FI.

    Gordon

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    1. Living Once,

      Glad you enjoyed it and found it helpful and encouraging. My two main goals for the blog are to keep myself accountable and to motivate others. Sorry to hear about the layoff, but if anything this can serve to push you more towards FI.

      It's great that you had already been working towards FI. If I had, then my dividend income would have been built up more and I could have used that as a further buffer once my savings ran through. I see you're in the UK and I don't follow it that much, but hopefully the economy has gotten better there and you can transition into another job quickly. If you have the opportunity to go on your own, then I'd say do it. The longer you wait the harder it will be for you to feel comfortable in doing so.

      The comments on most blog posts/articles usually end up providing more nuggets and insight than the post itself.

      Keep it up and feel free to share your progress along the way!

      Thanks for stopping by!

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  12. How nice, wish I could say the same. For me it is the opposite, the single worst thing that has happened to me. Sent into a severe depression now hooked on anti depressants & Adderall for supposed adult ADHD. I have not had a perm job since 2010, many temp jobs several I just lasted a week or even a few days and fired for very 'vague' reasons or no reason and had to dig & dig to find out a scintilla of why I get let go so suddenly and unexpectedly. I did come into some money in 2010 which I invested bought 3 FedEx Home Delivery routes in the NYC as an independent contractor. Invested close to 200K, revenue of over $7,500 a week deposited into my business account but after expenses have virtually nothing left.. I don't even have money for self employment taxes, and can barely pay rent, credit card debt, student loan debt and other expenses... I guess I am discouraged, I have probably been on close to 100 interviews since 2010 for perm jobs and never get hired for one reason or another.

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    1. Anonymous,

      Sorry for the delayed reply. I've been really busy between work, the blog going on the backburner when I get home, and then coming back to work. I don't think anyone would blame your for being discouraged in your situation. I know when I was laid off and went on interviews with no luck getting the job my attitude just went downhill. There's only so much constant rejection that someone can take before it's going to start affecting them in other ways.

      Without more detail to your specific situation it's hard to really comment other than to stay focused and something will come. I'm sure you've looked already but have you tried looking at other fields other than those related to your previous work? I would also say focus on any other skills that you have or need that are relevant to almost any field. There's probably a local Toastmasters group in your area that you can go to and work on your public speaking. That's just one thought. Hopefully once you do get a job you can then refocus to doing the best that you can in that position and shift your priorities towards getting rid of the debt and getting your finances back in order.

      For the ADHD, especially since you say it's supposed I would say look at your diet. I'm not a doctor nor have I been trained in anything health related but your diet can affect you in ways you wouldn't even think it could. But that's just my thought.

      Thanks for stopping by and hopefully something more permanent will come around with the economy starting to get back on more solid ground. Keep us updated.

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  13. I too, noticed that I need much less in retirement than I thought. Life is good!

    Good luck on your journey.

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  14. So glad i came across this. Officially a week into my layoff (after 7 years with my first job out of college) and I've experienced many of the emotions you mentioned.. Can't wait to delve in more

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    1. Thud,

      It really can be a very emotional time. Anger, sadness, frustration are abound but don't forget to take the time to realize the positive. You can take the time to figure out what you want to focus on with your next step. Take some time for yourself if you have savings set aside. Do a bit of travelling. Obviously life situations play a big part in how quick you need to get back to work but the 1.5 years I was out of work was a blessing in disguise. I realized that I didn't really enjoy the work I was doing and am now in a far more lucrative field with better opportunities. It's also allowed me to turbocharge my journey to financial independence and within a year or two I could seriously consider slowing down my work schedule without any real lifestyle changes.

      Thanks for stopping by!

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