More on Unemployment Benefits

After writing last week's post about unemployment benefits by state, I checked in with Mortimer to get his take on the subject, as he is still collecting unemployment himself. Here's what he had to say:

Benefits don't change at all based on single/family. It varies by state, so if you work in NJ you get more $ than NY and Mass gives even more $ than NJ (close to $600 per week I believe). Then most states calculate based on your last salary -- I think it's some sort of time frame involved like how much you made over the last 3 quarters. Most folks will get the maximum unless you are making like 30K or less. Max now is $405 plus the feds are adding $25 (not sure how long the $25 lasts). So single person making 200K and a family of 7 making 50K will get the same $405.

Not sure if there is a fair way to do it re families -- they would have to look at household income because you could be a family of 7 with another income in the house. Too complicated. NYS needs to up what it is paying -- they haven't done that in a number of years. They aren't even making inflation adjustments.

And while we're on the topic, there was an article this past weekend about unemployment benefits running out for a lot of people:
Prolonged Aid to Unemployed is Running Out

Over the coming months, as many as 1.5 million jobless Americans will exhaust their unemployment insurance benefits, ending what for some has been a last bulwark against foreclosures and destitution.

That's pretty scary. There may be some signs of light at the end of the economic tunnel, but stats like that don't bode well. If your job is gone and your savings are gone and you lose your umemployment benefits, what's left? Here's a few examples cited by the article:

Ms. Lampley, 40, who is married with three children, lost her job as a human resources officer in January 2008 and had been receiving $351 a week, which covered the groceries and gas. Even so, she and her husband, who still has work as a machinist, were sinking into debt. Now, still poorer, she feels devastated because they cannot buy their son a laptop to take to college and she cannot give her 9-year-old son money for the movies.

In Ohio, where unemployment is 11.1 percent, Cathy Nixon, 39, a mother of four teenagers from Lorain, has been out of work for much of the time since June 2007, and her benefits — $313 a week — run out in September. Ms. Nixon is already fighting foreclosure and said she feared that when the benefits end, “we’ll be homeless.” She was unable to afford summer camp and baseball activities for her children, despite scrimping on basics.

Raymond Crouse of Columbus operated heavy construction machinery but has found no work since 2007. Mr. Crouse is 72 and receives Social Security but said that was not enough to live on. The $190 a month he has received in unemployment benefits enabled him and his wife to hang on to the house they bought 15 years ago, he said. But with the benefits ending next month, he fears that they will not keep up.

The comments on the article get into quite a debate over some of these quotes, such as whether or not it's trivial to worry about getting a laptop for your child to take to college, or giving a kid money to go to the movies. (A lot of colleges require students to have a laptop these days. But while it sucks to have to deny a child little things they want, saying no to a movie might be a good lesson in reality.)
What if this situation goes on for many years? What do we now take for granted that we'll have to give up? Will we see more extended families living together under one roof? At some point, will our whole definition of middle class life change?

Helping Out in a Health Crisis

Sometimes I look at the past year and wonder if all the good luck I've had in life is turning out to be a loan that's been called in by the bank. Nothing bad has happened to me personally other than losing some money in the stock market, but I feel like misfortune has been getting closer to me, in the form of bad things happening to my friends and family. In addition to my father's brain tumor and friends losing their jobs and getting divorced, I've had a cousin and a friend diagnosed with very serious cancers. Things were very scary for a while with both of them. Now, miraculously, things are looking pretty good. But none of this came without a cost, both emotional and financial.

Both my friend and my cousin have health insurance, one through an employer and one privately purchased as she is self-employed. But that didn't mean their treatments were affordable. In one case, there was chemo and radiation and major surgery. In the other, there were chemo treatments, a special diet, and a lot of long-distance drives to doctors. Both had to take time off work, unpaid in at least one case. Both of these people have spouses, but neither were making much money. Both couples also had another dependent, either a child or an aging parent. What all this comes down to was that even with insurance, the illness put them in debt.

But here's the upside to this depressing story: people helped. Both my cousin and my friend knew people who organized fund-raising events for them. They were each fortunate enough to have a lot of family and friends who could donate their talents or their services or their products or convince others to do so. In each case, a whole community came together and donated money and showed their support and love in a truly special way. They raised thousands of dollars, but it ended up being about more than just the money, somehow.

All this reminded me of an article I bookmarked months ago: Helping Out With Cash: A Delicate Art (which was an follow up to an earlier article Not Laid Off? How to Aid the Less Fortunate. Both of these articles give some excellent suggestions on how to handle the delicate issue of offering help to someone who may need it, but feel awkward about asking for it or accepting it. It's a more and more common issue these days. I just hope my usual sphere of good fortune will return and no one else I know will need this kind of assistance! How about you? Have you ever been involved in a situation where friends helped raise money for someone in need, or been the recipient of such aid?

Maximum Weekly Unemployment Benefits

On my post about adjusting to a financial crisis such as losing one's job, a commenter noted

It doesn't sound like you figure unemployment into your emergency plan which makes the scenario that much more stressful!

It's true-- when I visualize losing my job and how I'd adjust, I think first of all about what it would take to live on my savings. I'm sure I would qualify for unemployment, but I certainly couldn't count on it to survive. The state of New York is notorious for having very low unemployment benefits, especially in relation to the cost of living in New York City. See this article for a state by state list of maximum unemployment benefits as of 2008. You know there's something out of whack when someone in New York maxes out at $405, or $3 a week less than someone in West Virginia! $21 less than someone in Iowa! $2 less than someone in Kansas! Not to mention that New Yorkers get less than half of what someone in Massachusetts can get. Massachusetts is a great state to be in if you're going to lose your job-- $900 a week maximum!

$405 a week, if that is what I qualified for, would cover maybe half the cost of my current lifestyle-- which, admittedly, is not all that spartan. If I was being careful and making a lot of cutbacks, I might almost balance my budget with an unemployment check-- but there's a limit to how long you can claim benefits. (Normally, you can only claim full benefits for 26 weeks, although right now, due to the economic situation and the stimulus package, benefits are available for an extended period-- up to 53 additional weeks in New York. See the Department of Labor website for details.)

I guess what this comes down to is one of my psychological techniques: I like to pretend money isn't there! When I think about retiring, I try to plan for my own savings to pay the bills, and figure whatever I get from Social Security would just be extra. When I think about losing my job, I figure unemployment benefits would be extra. I always prefer to overestimate my expenses and underestimate my income-- it leads to far better consequences than doing the opposite!

How Fast Can You Adjust?

A while back, I posted "Do You Have a Crisis Plan," asking what you would do if you were laid off or had some other sort of financial crisis. But sometimes the question is not just "what will you give up," but "how quickly will you give things up."

An example drawn from real life: a couple in which the husband has just lost his job. The wife is a stay at home mom. They have a lot of home equity, and pretty good savings due to an inheritance, but they have a pretty expensive lifestyle. They also have a few significant one-time expenses planned for later this year: a vacation and a bat mitzvah.

Their savings might last a couple of years if they stay in their current home and make some cutbacks, like taking the kids out of private school. They could also refinance their mortgage to lower their monthly costs a bit, though that could be problematic if no one has a job. They could sell their house and move to a much smaller place with lower maintenance costs. They could cancel the vacation and scale back the bat mitzvah, but they don't want to, for the sake of the kids, and probably, to some extent, keeping up appearances.

The question about these changes is, how much? How fast? People often talk about having a 6-month emergency fund, or a 1-year emergency fund, but what if that isn't long enough? In this particular situation, and in this economy in general, I'd be extremely worried that it could take a very, very long time for the husband to find another job, and it may not be for anything near his previous salary level. If they just coast along trying to economize in minor ways, they could end up in big trouble. But if they were able to sell their house quickly, they'd free up a lot of cash that could significantly extend the time they can survive without anyone working.

Losing a job is a traumatic thing. People are scared and angry. They might feel a lot of self-doubt and shame. They want to put a good face on things, for themselves and for their kids, but also for the world around them: they don't want to admit they're in trouble. Each person's situation will be different, but I think it's important to take a hard, realistic look at your savings and budget and your prospects for getting another job, and then plan for the worst. I don't mean to downplay the significance of a family having to sell their home and turn their lives upside down-- it's not the sort of thing you should or can do at the drop of a hat. But sometimes you just have to act sooner rather than later.

Back to my crisis plan: if I lost my job today, I'd probably give myself a week or two before I tried to find a short-term roommate, given that back-to-school timing would be key-- at another time of year, I might let myself wait a little longer. I would immediately be emailing everyone I'd ever worked with to try to network my way into a new job or at least some consulting work, and based on some connections I have, I think I'd have a pretty good chance at getting at least some part-time income based on that. I'd also be keeping an eye out for any other job I thought I could do. If I saw a retail store with a "we're hiring" sign, I'd apply, even if the money was far less than my current income. I'd probably take the first job I could get, and just keep looking for a better one. If I was unemployed for more than a couple of months, I'd also probably be talking about moving in with Sweetie and renting out my entire apartment. I'd rather make short-term sacrifices right away than have to make more drastic sacrifices after running out of money later. We'll see if the family I mentioned above make the same choice.

What, Me Worry?

I've been blogging for almost 4 years now--during that time, I've not always been the most productive blogger, but I've gone through phases where I was full of ideas and I have well over 100 draft posts in various stages of completion, some dating back to the first month I started this site. Below is a post I wrote in January 2006. I'm not sure why I never published it. At the time, I'd just signed a contract on an unfinished new-construction condo priced at over $300,000. My salary was $82,000. My net worth was about $256,000. It was definitely a turning point in my life, and I was thinking about the idea of worry:

Everyone worries about money, right? Well, yes and no. There are different kinds of worry. Poor people worry about money, for obvious reasons. Rich people also worry about money, in different ways. And so does almost everyone in between.
I'm trying to think back (without actually reading everything) about how much of this blog has been me "worrying" about money. I've talked about my concerns about retirement, I've anguished over what kind of home I could afford to buy, I've obsessed over saving money, interest rates, the stock market, and picking up change. But over these past 7 months or so, and even over the past few years, I have never really worried about money. I've had some anxious moments when I had a little cash flow crisis, and even one when my wallet was stolen in a foreign country and I temporarily had hardly any cash, but under all that, I have had a sense of security.

Why this blithe lack of concern? It's simple: I've had cash in the bank, and I've known, as well as it's possible to know, that my expenses were under control. Of course I sometimes wondered what I'd do if my home burned down or something, but hey, I have insurance. If I lost my job? Hey, I have a lot of contacts in my industry and a lot to offer as an employee. Sure, nothing in life is guaranteed, but beyond protecting yourself to a reasonable level, why lose sleep over it?

But the other day, I realized that I was worried about money in a way I haven't been in a really long time, if ever. I keep looking at bank balances, adding them up, and trying to make sure I haven't made some horrible mistake. I am pretty sure I will be fine, but there is this edge of uncertainty that makes me nervous. Quite a lot of my net worth has been in cash. I've already taken a big chunk out of that with the 10% deposit on my condo. Soon, I'll be paying another 10%, and a slew of closing costs including various taxes and attorney fees. And I'm doing all of this on my own, with no help, no safety net.

I have enough money for all these things right now, if I count my stock and mutual fund holdings. And I'll have a little more money over the coming months as I get my tax refunds and bonus, hopefully. And then I will have some bonds and CDs that I could cash in case of an emergency. According to my trusty spreadsheets, I will have at least 5 months worth of living expenses on hand after I close on my new place. But at first very little of it will be liquid.

I know I've been sort of spoiled-- this is nothing compared to the way I would feel if I had a lot of debt and had lost my job, etc. But I can't help it-- it makes me a little nervous to have comparatively little cash, especially since I know I'll be entering a phase where I won't have as much of a positive cash flow each month. If I don't have any expensive disasters and keep getting at least small raises at my job, I should be ok, but I won't have the same feeling of security for a few years to come. But still, I am trying not to lose any sleep over it!

OK, fast forward to 3 1/2 years later. There's been a housing bust and a massive stock market crash and unemployment is close to 10%, all part of an economic crisis unrivaled by anything since the Great Depression. Has my attitude towards worrying changed?

Fundamentally, no. Global crises aside, my life went on: I bought the condo without it being a total disaster and I love living there. I got a promotion and a couple of raises and bonuses. I even splurged on a big vacation, which is another long-overdue post in draft form! I kept contributing to my retirement funds and got my cash flow back under control after all the new home expenses. My net worth took a big dip, but it's still quite a bit higher than it was in January 2006.
I am not a blind optimist: I think a false sense of security is dangerous, and I certainly don't mean to sound smug. But I still feel like I am relatively well-positioned to live the way I want to live, or to make adjustments as needed in order to get by in a crisis. "Worry" is a flexible word-- if you read it as meaning "taking care of" or "thinking ahead about" my finances, then yes, I worry. But otherwise, I'm still sleeping pretty well. It's a good feeling, and one I hope I can hold onto for many years to come.

The Latest on Mortimer

I'd been wondering lately what Mortimer was up to. Since being laid off at the end of February, he'd only managed to go on one interview. I tried to hook him up with a job at my company that would have been perfect, but the position ended up being down-graded and they thought he was overqualified and didn't even interview him beyond an introductory phone call with an HR person. In our last couple of emails, he was being a little evasive about whether he had any more job leads and I was starting to worry that he was in total denial about his situation.

But we had dinner last night, and the good news is that he's been working for about a week! The bad news is that it's a temporary project... and he's being paid under the table. This is totally dicey, of course. He's still collecting unemployment, but the weekly payment is particularly low in New York, so this extra money really helps. He just had to renew his lease, which meant his rent went up by about $100, to $1,250, I think. His health insurance is about $250 a month-- weirdly, it's now less than it cost him when he was employed, thanks to the COBRA changes that were part of the stimulus package.

It's interesting to see these government policies at work in a way that directly affects someone I'm close to-- sometimes it's too easy to see government spending as this big waste that just goes straight into the hands of corrupt administrators or the stereotypical welfare cheat who's sitting around watching TV while the checks roll in. On the one hand, what Mortimer's doing isn't exactly ethical-- he's definitely gaming the system. But on the other hand, he wants to work and has been trying to find a job. He found a situation where someone could afford to pay him for a little while, but knowing the future of it was uncertain, they wanted him to be able to keep collecting unemployment benefits (I think he is getting even less than the maximum of $430 per week). If Mortimer gets the chance to take a real full-time job, he'll happily do it, so I can't really blame him for what he's doing to make ends meet in the meantime. (FYI, of the 30 other people who were laid off with Mortimer, he said only 6 have found jobs.)

Have you ever been paid under the table? Would you do what Mortimer's doing?

Are You Anxious About the Recession?

A lot of people out there are feeling pretty stressed out about the economy these days: Recession Anxiety Seeps Into Everyday Lives, from today's New York Times:

Anne Hubbard has not lost her job, house or savings, and she and her husband have always been conservative with money.

But a few months ago, Ms. Hubbard, a graphic designer in Cambridge, Mass., began having panic attacks over the economy, struggling to breathe and seeing vivid visions of “losing everything,” she said.

She “could not stop reading every single economic report,” was so “sick to my stomach I lost 12 pounds” and “was unable to function,” said Ms. Hubbard, 52, who began, for the first time, taking psychiatric medication and getting therapy.

That might seem pretty extreme, but the article goes on to detail various other cases of people having nervous breakdowns and turning to drugs, therapy, meditation and other methods to reduce their levels of stress about the economy, despite still being employed and having savings.

Ms. Hubbard, knowing “financially we were fine,” said she believed “I shouldn’t feel like this, I’m lucky.” She cried visiting her primary doctor, who recommended therapy and medication, hard to accept, she said, because her Depression-era parents believed “you pull yourself up.”

“I felt like a neurotic middle-class, middle-aged woman too weak to deal with life on my own,” she said. “I should be stronger, it was simply money, and why do I have to take pills to not worry about money.”

But treatment and further organizing family finances helped. She said the weakening economy made her “fear that even if you do everything right, something bad can happen to you.”

Do you feel this way, or know anyone who does? I find myself worrying about money in a way that I didn't a couple of years ago. Back then, I knew I was saving money at a good rate, and my investments were doing well enough that I seemed to be right on track to reach my retirement goals. Hopefully I'll still end up fine, but I may not be able to have quite as much fun along the way!

Meanwhile, I'm worried about my friend Mortimer, who's only had one interview since losing his job. I recommended him for a job at my company, for which he would have been very qualified, and they did call him to discuss it, but it turned out that the position paid about $25,000 less than he'd been making. Mortimer, to his credit, made a very good case about why he'd still be interested, but they seem to fear he's overqualified, or would be likely to move on at the first opportunity. To me, Mortimer admitted he wasn't thrilled about the idea of making so much less, but he was already trying to figure out how he could make ends meet on a lower income, knowing that he has to get a job, any job. But there aren't many out there in his field, unfortunately, and I know he doesn't have a lot of savings to fall back on. I haven't heard whether he's been able to start collecting unemployment benefits yet, and I'm worried he'll get into debt very quickly.

Fortunately, my worries are mild at this point. I'm not losing sleep or pulling out my hair, though I've probably been more stressed out at work because we're all under a lot of pressure to perform. But I'm trying to take it all in stride and save any real anxiety for an actual crisis, which hopefully won't happen!

How about you?

Almost $13 Trillion in Net Worth Lost

From the NY Times website:

Net Worth of Families Down Sharply

Family net worth had hit an all-time high of $64.36 trillion in the April-June quarter of 2007 but has fallen in every quarter since that time.

The record 9 percent drop in the fourth quarter pushed total net worth down to $51.48 trillion, a level that is 20 percent below the third quarter 2007 peak.

Wow. If you estimate the population of the US at around 305 million, it's a drop from about $211,000 per person to $169,000 per person, a drop of $42,000 each. I can't say I'm proud of having done more than my share of the losing!

Do You Have a Crisis Plan?

What would you do if you lost your job or had some other sort of financial crisis? What would be the first thing you'd give up?

I was thinking about this the other day when Sweetie and I were joking about whether we'd move in together if either of us lost our jobs. I have savings I could live on for a while if I lost my job, but I don't think I'd want to count on them. Since I live in a 2-bedroom apartment by myself, I think the first thing I might do would be to get a roommate-- I could probably get $800-900 a month, or maybe even more. That would make a big dent in my expenses, and though it would be a big lifestyle shift, I could probably handle it as I'm spending less time at home these days anyway. If things came to the point where I really did decide to move in with Sweetie, then I'd consider selling some furniture and putting a few things in storage in order to make it work.
As an aside here, I don't think financial necessity is a good reason to move in with someone, but I'm sure it is often a big part of the decision!

What else would I do? I pre-pay my gym membership for a year, and though I really wouldn't want to give it up, I'd consider suspending the membership or letting it expire. I'd definitely cut back on restaurant meals and takeout and be a lot more careful with my food shopping. I might give up my land line and just use my cell phone. I'd give up my French lessons. I'd be careful about all other incidental spending, such as clothing, magazines, etc. But all of that would be far less significant than changing my housing situation.

Sweetie said "ugh, a roommate? That wouldn't be much fun," when we were talking about this. My response: "well of course it's not much fun! It's a CRISIS plan, and it's supposed to just be temporary." I'm lucky to live in a place where I could rent out an extra room, and lucky to have someone who could handle me moving in-- not everyone has this kind of flexibility. But in other areas, I feel like my expenses are relatively low and I don't have much room to cut back-- I can't have a lower cable TV bill than zero, for instance.

How about you? Do you have options to make major changes in your lifestyle if circumstances demand it?

The Comeback Calculator

I just noticed this on the NY Times website: an interactive graphic where you can calculate how long it will take your portfolio to rebound to its peak level before the crash. I tried running the numbers for my 401k, which I think peaked at about $200k, maybe a bit higher. For me to reattain that level in 2 years, the market would have to have annual returns of 20%! Not bloody likely!


More realistic, though still optimistic at this point, would be annual returns of 5%-- that means it would take 4 years to regain my former peak.


It's also interesting to play with small changes in the annual rate of return to see how it affects the account balance after 30 years-- at a return of 4%, I'd have a little over $1 million; at a return of 6%, I'd have over $2 million. And in my bizarro-world scenario of 20% annual returns, I'd have about $140 million. Leaving aside that craziness, it's amazing that seemingly small differences in market returns could make such a dramatic difference in my retirement lifestyle!

Of course, this is just my 401k, where my contributions are limited. I'm also not taking any extra employer contributions into account. But still, it's scary. When the market drops so rapidly and becomes so volatile, it's tempting to think it could rebound as dramatically and quickly... but that just isn't the way it happens...

Financial Adviser Tries to Fake His Own Death

Another story of what sounds like a desperate sleaze bag, trying to escape his comeuppance...

A financial adviser from Indiana disappeared into the Alabama woods early Monday after faking a distress call and parachuting from a small plane that crashed in Florida.

The police in three states were looking for the pilot, identified as Marcus Schrenker, 38.

No one was hurt in the crash. According to the police in Santa Rosa County in the Florida Panhandle, where the plane went down, Mr. Schrenker turned up safely about 220 miles north of there. And there is evidence that Mr. Schrenker was an experienced pilot who might have been trying to fake his own death.

His life seemed to be unraveling. Court records show that Mr. Schrenker’s wife filed for divorce on Dec. 30. A Maryland court recently issued a judgment of more than $500,000 against one of three Indiana companies registered in his name — and all three are being investigated for securities fraud by the Indiana Secretary of State’s Office, a spokesman, Jim Gavin, said.

Here's the link to the rest of the New York Times story.

After reading this, don't forget to tell me how much money you make in the comments on the next post!

Layoff Gossip

I feel like the effects of the financial crisis are starting to hit closer to home. I know a few people who have been laid off recently and at least one of them was someone I'd never have expected to lose his job. I feel relatively secure in my own job, but I got a cryptic email from a colleague the other day that suddenly made me a little paranoid-- in these times, it would be silly for anyone to think they're indispensable.
What I found interesting about some of the layoff gossip was how people talked about the circumstances of those who lost their jobs. One person was rumored to have a wealthy wife who'd have no problem covering the bills on her own. The other supposedly had "saved every penny he'd ever earned" and invested in income-generating rental properties, so it was thought that he'd be just fine.
I wonder when I'll hear a story about someone who's actually living paycheck to paycheck and desperate to find their next job fast. I know those stories have to be out there too. Perhaps it's just too painful to gossip about those people-- everyone's depressed enough and freaked out enough as it is. We'd all rather feel like everyone's going to be okay, and that the people who are losing jobs didn't really need them.

Have you lost your job as a direct result of the current economic slowdown, or do you know anyone who has? How are people talking about it?

Greenspan: "I made a mistake"

Wow:

“I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such as that they were best capable of protecting their own shareholders and their equity in the firms,” Mr. Greenspan said.

New York Times article