The Wall Street Journal has an article about people who continued to live high on the hog when they were laid off and given fat severance checks, and who are now scrambling to make ends meet.
• Paul Joegriner was CEO of a small bank, making $200,000 a year. When he got laid off in March of 2008, he received a $200,000 severance package. His family spent it all and is now rapidly going through the $100,000 they had in savings. They'll be out of money in six months.
• Michelle Patterson lost her job as executive director of marketing for a publishing company in January, making $140,000 a year. Since then she spent her $20,000 savings/severance on restaurant meals, pedicures, haircare, and "daily Starbucks runs." Now she is almost out of money and has had to cut her budget to the bone.
• Chuck Hipsher was laid off from an ad agency in Detroit in February 2008. The $60,000 he and his wife (also laid off) received in severance has evaporated to $600.
Hipsher's explanation is similar to the others featured in the article: "We were stupid. 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."
The article goes on to describe the various ways these people are trying to make ends meet. The moral of the story seems to be this: Save as much money as you can while it's coming in. That way, if it stops coming in, not only will you have a nice nest egg, but you'll also be in the habit of frugal living.
Life on Severance: Comfort, Then Crisis
Mark Frauenfelder Credit.com contributor, editor-in-chief of MAKE magazine and the founder of the popular site Boing Boing, Mark was an editor at Wired from 1993-1998 and is the founding editor of Wired Online. He covers creative DIY projects and how-tos that will help you make the most of your money.
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