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| Friday, November 13, 2009 |
| Life on Severance: Comfort, Then Crisis |
 The Wall Street Journal article from earlier this week - Life on Severance: Comfort, Then Crisis makes you wonder how people can use severance to delude themselves that their financial lives have not been cratered by the great recession...After working for more than a decade in New York ad shops, Chuck Hipsher moved to Detroit in 2005. He took a position at the Campbell-Ewald agency, where he helped launch the Chevrolet Silverado campaign. Raised riding in the back of his grandfather's Chevy pickup in Iowa, Mr. Hipsher, 50, says he was "elated" at the opportunity.
He met his wife at the ad agency, and the two had a $40,000 wedding. Kelly Hipsher, 32, was laid off in October 2007 and found out she was pregnant in February 2008. A week later, Mr. Hipsher's pink slip followed. Two months after that, the out-of-work couple moved to Greenville, S.C., to be closer to family and get a fresh start. Together, they had received about $60,000 in severance. "Now we have $600 to our name," says Mr. Hipsher.
Although their rent was cheaper, Mr. Hipsher says the family continued to spend like before. They moved with three cars -- two BMWs and a Chevy Silverado. They continued to buy cases of $36-a-bottle wine. They spent $250 a month on a cleaning lady, and Mr. Hipsher dropped $50 a week on flowers for his wife. The couple still dined out regularly.
"We were stupid," he says. "You become accustomed to a certain lifestyle. When your world changes and things dictate that you change, you're pretty stubborn to give things up."
He sold the BMWs and voluntarily turned in his beloved Silverado to avoid the repo man. "It was heartbreaking," he says. He replaced the fancy wheels with a Chrysler minivan.
Before the layoffs, the Hipshers had no debt. Today, they owe about $70,000 -- including money borrowed from family members and $31,000 in credit-card debt. To hold off the collection companies that call daily, Mr. Hipsher says he is doing his best but is also considering filing for personal bankruptcy.
After a stint selling new and used BMWs on a lot in Greenville, Mr. Hipsher recently began consulting for free for a small marketing firm, "to stay busy."
In September, a Web solutions company hired him as a marketing director. Between salary and commission, he thought he could match half his old income. But so far, he says he's only received about $1,220. Tight for cash recently, he pawned his wife's $12,000 wedding ring for a $2,000 loan. He has until Dec. 28 to pay back the principal, plus $500 in interest -- or else he forfeits the ring.
Looking back, he kicks himself for failing to enforce financial discipline right after losing his job in Detroit. "That precious nest egg is gone," he says. Follow-up to story on WSJ Blog - Revisiting Lives After Long-Term Layoffs |
| posted by Boston Gal @ 11:16 AM *
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| 14 Comments: |
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My sister fits this profile somewhat. When she took a buyout for a year's severance and a guaranteed difficult path as a freelance cookbook author, she said, "I know it means life changes...fewer dinners out..." I said nothing, because it does no good... Now that the severance is gone she miraculously qualified for unemployment and is living on that and, I assume, savings... In the future... who knows... Only lifestyle changes that I can see...
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"We were stupid," he says. "You become accustomed to a certain lifestyle. When your world changes and things dictate that you change, you're pretty stubborn to give things up."
Or, as my grandfather used to say, when you find yourself in a hole, you stop digging! I'm assuming most readers of Boston Gal's Open Wallet wouldn't fall into this trap!
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I read the entire story. There were lots of struggling folks turning down well-paying positions while going broke faking their lifestyles. There seems to be few who want honest work and who take their lumps and keep moving on.
That entitled attitude is truly insane and I have little sympathy for them. If I get laid off my family and I will immediately go into financial emergency mode. Beans and rice for dinner, anyone?
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What a fool...article says he has turned down 3 jobs, 1 of which was "$60,000 less" - 60,000 less than his previous $200,000 still sounds pretty darn good for his situation. So...does he really want a job???
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I'd think most salaried people would be challenged by a windfall/severance. If they are hopeful about finding another job it could easily end in financial problems.
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Perhaps it is because I have experienced a couple of layoffs in my past - but the over confidence of some of the people in the article is what amazed me.
I never assume my job will always be there for me nor that another is easy to obtain. In fact, I assume the opposite. I assume that jobs will be harder to hold onto in the future and getting a new one will take longer and likely result in lower compensation and less benefits.
I struggle now, while I have a good job and enjoy a nice salary, to save, invest, and pay off debt.
Hopefully I will be proven wrong and jobs will once again be plentiful and salaries/benefits generous.
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I could understand why he wouldn't want to take a job if there was a risk of being laid off without a security net, such as severance. When you are at a new job for only 2 months and get fired, you can't file for unemployment. However, unemployment was not making a dent in their monthly nut. He was extremely optimistic about his skill set and probably didn't factor that there were thousands of former Wall St folks with the same skill set out looking for jobs at the same time. If they didn't have a generous severance package to fall back on they would have taken the jobs he turned down and there would be fewer opportunities for him to choose from. As he cuts luxuries off of his wife's food shopping list, he would have done many things differently and probably will in the future.
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People always seem surprised that I'm not particularly worried about being unemployed... Most people do spend all their salary that they don't put into their mortgage or a retirement account. Which has always seemed an insane way to live to me.
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The lady in the article who was making $140,000 per year but had only $20,000 from severance and savings to supplement her unemployment search really amazed me.
What the heck has she been doing with that salary? Certainly not saving it. A single person living paycheck-to-paycheck with that kind of salary is frankly obscene!
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I think it's really easy to judge others without walking in their shoes.
Articles like these annoy me b/c the journalist is just trying to make him/herself feel better by making fun of others.
Yes, we all make mistakes, but it really is difficult out there right now.
See you guys at FS one day!
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If people haven't had it actually happen to them (or someone close to them) it's really easy for people to be in denial about layoffs and how to handle them. One benefit of having 10% unemployment (amidst overwhelming negatives) is that many many more people are going to "get it" and hopefully this understanding will inform their financial choices for the rest of their lives.
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I disagree Financial Samurai,
I think journalist know better than most just how difficult it is to hold onto, or after a layoff, obtain another well paying job with benefits in their profession.
Jobs at newspapers, magazines, book publishers, etc have been disappearing for years and new comparable jobs are almost impossible to come by.
Plus, the folks in this article who have been laid off for a year and are now saying "who could have foreseen a year later, I would still be unemployed" are full of it. This recession started in 2007. We are in the 3rd year of it. So anyone laid off a year ago, had to have been wearing blinders for the past two years not to understand just how tough the job market was/is and just how precious their severance/nest egg was and needed to be carefully monitored and stretched out.
The fact that they ignored reality and just kept on living like it was 2005 shows how out of touch with the broader population these folks were.
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i can't speak for paul or michelle - nor would i assume to have the right to do so - only for myself and my family.
first off, any criticism directed at my shortsightedness is well deserved and well taken. i agree with those who've slammed my recklessness.
what doesn't fly, however, are all the posts related to whether or not i am looking for sympathy.
i'm here to tell you i'm not. i wanted the author of this article to include that sentiment, but somehow it fell by the wayside. perhaps it was perceived by some in the "we were stupid" statement i made. but that wasn't enough, in my humble opinion. my intention in participating in this story in the first place was to clearly say: IF YOU HAVE LOST YOUR JOB OR MIGHT LOSE YOUR JOB AND HAVE SEVERANCE COMING, PLEASE DO NOT DO WHAT I DID.
that's it, plain and simple.
one other thing that missed the cut in my story was the fact that i moved my wife and i to south carolina not only to be closer to family because we were going to have our son in the fall (and who wants to winter over in detroit unemployed - come on) but also to make a run at my own business. i formed an llc, i built a website (http://www.loudbell.com), i joined the chamber of commerce and other organizations and i spent a good chunk of my change on trying to get it up-and-running in the worst economic climate of our time.
perhaps that was the true misstep on my part. after it was clear it wasn't going to take off, i scrambled for another ad agency job - but the ad industry had changed overnight, and even more creatives like myself were looking for work. bad scene.
a good friend and i created a blog relating this - and to those who think i didn't get it, please scroll all the way down to the very first post i made. the blog is located @:
http://billchucksexcellentjobsearchadventure.blogspot.com/
we haven't posted on it in awhile because, well, it's exhausting and makes one feel strangely like sisyphus.
finally, the story reads as though we were spending like drunken sailors all along and then went - "doy! we're broke!" not the case. we clamped down on the frivolous stuff (wine, cleaning ladies, flowers) before we left detroit - not that i need to explain myself, but that was the reality.
not sure if this helps anyone else but man, i feel better.
good luck and god bless to all those looking for work.
- chuck
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All the people profiled in this article were living way beyond their means to begin with. They hardly had any savings and were trying to live high on the hog even when they were working for relatively modest incomes. Now without incomes they have all gone flat broke quickly, it is no surprise. I'm 32 and was laid off last year but have saved several hundred thousand dollars. I had no severance but could easily live for several years off of my savings. Nonetheless I cut my expenses pretty dramatically anyway until I found a new job. These people don't deserve any sympathy, they are simply morons who have always lived lifestyles they couldn't afford and now its coming back to bite them. Being their ages and not having any savings is pretty sad.
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My sister fits this profile somewhat. When she took a buyout for a year's severance and a guaranteed difficult path as a freelance cookbook author, she said, "I know it means life changes...fewer dinners out..." I said nothing, because it does no good... Now that the severance is gone she miraculously qualified for unemployment and is living on that and, I assume, savings... In the future... who knows... Only lifestyle changes that I can see...