Financial Analysis of the Worse Case Career Scenario

​In the prior post, I described Jay’s layoff from a large company in northern Connecticut.  Money is always the big worry for my career counseling clients contemplating career change.  So, I thought it would be helpful to precisely describe what happened to someone who lost his job and had business failure.  The hope is that you do not focus on the failure but rather the “non-disaster” even in a disastrous situation.
Year 1: Jay loses his job.  His wife is not working at the time. The combination of severance (approximately $50,000 over 4 months, unemployment (not sure but perhaps $10,000), a gift from his parents of $14,000, and his wife’s new income from substitute teaching, along with clamping down on extraneous expenses and taking away emergency bank savings, made year 1, a mild loss of net worth due to loss of emergency savings.  But those rainy day savings are for rainy days.
Year 2: During year 2, Jay started to really like his new life – getting out of the corporate rat race is liberating – and was exhilarated when he landed his first client.  His wife continued to substitute teach and worked hard towards her teaching certification.  Nonethless, they had to start dipping into their 401k savings (about $60,000).
Year 3 was Jay’s big year.  He landed two more clients.  The combination of his business plus his wife’s teaching basically paid the bills.
Year 4 was a disaster.  Jay’s projects with his new clients ended and his steady client from year 1 had no more work.  Jay had made the mistake of spending too much time working “in the business” (working on the work) as opposed to “working on the business” (finding new business). He did not create a pipeline of clients and had the misfortune of having his client engagements terminate at the same time. During year 4, Jay paid for his family bills largely through 401k spending (about $80,000)
Financial Analysis: As I described in a prior post, to my surprise, Jay was very upbeat about his 4 year journey.   His net worth had declined by about $90,000 (about $150,000 in combined 401k and savings drop but his home value went up by 60,000).  In addition, his wife was on her way to making a full time income as a teacher (somewhere in the $50-60,000 range) and Jay was going to either head into the job market or build his business in a wiser fashion.
I usually relay success stories.  I find Jay’s failure story as inspiring. Jay had the worst possible career scenario occur.  He discovered that nothing too calamitous happened.  More importantly, he built his psychological resilience and his practical entrepreneurial skills.  When he looks back on his life years from now, I believe that Jay will view this stretch of time as a big life success.