When Layoffs Occur

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Dear Dave,

I work in IT, and I recently learned that I’ll be losing my $88,000 a year job at the end of February. We’re debt-free, except for our home, and we have a full emergency fund in place. The problem is we just cash-flowed one daughter’s wedding, and we’ll be paying for another daughter’s college soon. I’ll receive a severance package of around $30,000 to $40,000, but we’re wondering if I should stop contributing to my 401(k) and stockpile cash until another job comes along. — Steve

 

Dear Steve,

You’ve done a great job handling your money, so going a couple of months without contributing to your 401(k) isn’t going to mean the difference between retiring with dignity and eating Alpo in your golden years.

In this case, I would temporarily stop funding the 401(k). You’re in a high-demand line of work, so I think you’ll probably land something soon and maybe even get a raise in the process. The main thing is to be intentional. Go ahead and start networking and lining up interviews now. Try to land something as soon as possible so that you can start at the end of February or the first of March. At that point, you could look at the severance package as a signing bonus.

There’s not much lost between now and then with what you’d actually gain from what you put into your 401(k). There would be going forward, for sure, but I think you’ll be able to make that up pretty quickly. — Dave

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Dave Ramsey

America's trusted voice on money and business, Dave Ramsey is a personal money-management expert and extremely popular national radio personality. His four New York Times best-selling books—Financial Peace, More Than Enough, The Total Money Makeover, and EntreLeadership—have sold more than 7 million copies combined. His latest book, EntreLeadership: 20 Years of Practical Business Wisdom from the Trenches, debuted at number one on the New York Times best-selling list.

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