Lessons learned from losing my job
2019 was an exceptional year for us. Both my wife (then fiancee) and I started careers with new employers, got engaged, and visited India together for the first time. By the end of the year, we had also seriously begun planning for our Indian wedding ceremony. We had barely finished our engagement photoshoot in March 2020 and started planning for our wedding website when COVID-19 established a new normal. The pandemic didn’t impact most of our loved ones’ health, and we are thankful for that! We had to postpone our Indian wedding ceremony indefinitely- it was a bummer, but it didn’t bother us for too long. However, COVID-19 did bring a stressful period for us- in October 2020, there was a month when both my wife and I were unemployed. My wife works in the events industry, which was decimated by the pandemic, and her employer furloughed 90% of the workforce. However, my reason for losing my job was not that straightforward. Because of lockdowns, USCIS (the regulatory authority in the US that oversees and processes visas) was running at a reduced capacity and that led to delays in the processing of my visa paperwork. This paperwork was necessary for me to remain employed (on a skilled immigrant visa, named H-1B). Since it didn’t arrive timely, I had to separate from my firm. After reflecting on the time when both of us were unemployed, I’ve documented the following lessons:
3-6 months of emergency savings don’t make the cut
It is a known fact that most MBA students graduate with a mountain of student debt. My situation was no different when I graduated in 2019. To make matters worse, my student loan was financed by an Indian bank, so the rate of interest was much higher (11.5%) than the typical low single-digit figures that are more common in the US.
Given the high rate of interest, I had been aggressively paying down my student debt ever since I started my full-time job. It was in July 2020 that my immigration attorney first educated me about the possibility of a separation from my firm. I was told that if the paperwork doesn’t arrive timely, I’ll have to separate from the firm at the end of September. The first thing I did upon learning this was to reduce my student debt payments to the minimum amount (I was otherwise contributing almost 50% of my monthly salary towards it). Thereafter, I began hoarding the difference as emergency expenses. By the end of September, I had hoarded about 9 months of living expenses in cash. Many people may think of that to be a stupid move, but having about 9 months of living expenses in cash gave me a lot of mental peace. The personal finance industry recommends three to six months of expenses in the emergency fund, but during the period when I was unemployed, I learned that six months of emergency expenses are not enough for mental peace.
Manage monthly $ burn rate actively
Another way of maximizing the horsepower of your emergency expenses is to keep the monthly expenses (or monthly burn rate) low.
If your monthly expenses are $3,000 and you have $60,000 saved in cash, you can survive for 20 months (60,000/ 3,000 = 20).
However, if your monthly burn rate is $5,000, with $60,000, you’ll only survive for 12 months
A monthly difference of $2,000 ($5,000 - 2,000 = $3,000) gives you additional 8 months. On losing your job, you will have additional 8 months to find a job that fits your criteria and you will not be under any pressure to accept the first opportunity that comes your way.
After my separation, I pledged to keep my lifestyle creep in check by evaluating my monthly run-rate twice a year. All of us can try to evaluate whether we truly need that luxury car (whose insurance and maintenance cost will also be higher), the costly gym membership (or a peloton bike), 5 streaming services subscriptions instead of two, etc.
One can make good friends at work as well
A few days before my last day at my firm, my team sent me a nice bottle of gin with a very sweet message (I now wish I had taken a photo of that note). Not only were my team members very supportive during the last couple of weeks, but a lot of them also frequently checked in with me during the brief period that I was unemployed. Who said that it is hard to make good friends at work?
CPI doesn’t reflect my true inflation rate
I have always been a big proponent of having a term insurance plan. I used some of my free time in October of 2020 to research the term insurance plans available in the US. Like a typical consultant, I built a detailed spreadsheet (more on that later) to calculate the target coverage amount for my term insurance plan. A critical step in arriving at the coverage value was to assume a reasonable inflation rate in the US.
The Indian government claims the inflation to be between 6-8%, but in the first 26 years of my life that I spent in India, I had learned that those numbers don’t paint a true picture of my personal inflation rate. Personal inflation rate is determined by the nature of goods and services that I consume, and that may not be well represented in the national indices used for inflation calculation. Soon after beginning the research on inflation in the US, I realized that US is no different. The basket of goods used for calculating CPI doesn’t match the basket of goods that I consume in my day-to-day. I did come across some extremely high projections (curious minds can read more on Chapwood index), but the bottom line was that depending on one’s lifestyle, the personal inflation rate can be significantly more than 2%.
Family and friends matter more than anything else
Even though the period was stressful, having a loving wife, supporting parents, and friends who frequently reached out to me made survival much more pleasant! Goes without saying, this experience further validated my ‘Balance the five F-balls’ principle.