Returning to Normal

Kerri's husband was laid off, and they received severance pay for 32 weeks. He's working part time now making more money but buying his own benefits. At what point can they leave survival mode?

QUESTION: Kerri in Fresno is calling because her husband was laid off, and they received severance pay for 32 weeks. He’s working part time now making more money but buying his own benefits, and they have $32,000 in savings. At what point can they leave survival mode, and do they have too much in savings?

ANSWER: If he has some work on the side that he controls in terms of the hours, sort of a small business where he uses his skill set but isn’t in competition with his employer, that would add a bunch of income.

I think you can return to a normal life. I think you just had this illusion of security before that you really didn’t have since they laid you off. Now we are facing the facts, and the facts are that the marketplace ebbs and flows.

I think you can leave an emergency fund that is a little heavier and go back to your 401(k), given that your pay is about the same. You can continue on your plan now. You are past the emergency and all you need to do is allocate some money to cover for the unpredictability of his hours.

If you do that and he’s netting the same or more money at the end of the year, then you’ve come out ahead and there’s no reason to go forward.