If you’ve read my post about avoiding the severance pay trap, you may wonder what you can do to maximize your severance payments. This requires two fundamental things – not spending your severance until you land your next job and looking at your long-term goals. Let’s further explore these two principles:
1. Not spending your severance – but simply putting it aside – is the most important point in this post. We will discuss several ideas on how to use your severance in Part 2, but you can’t do any of them if you spend your severance too quickly.
2. Knowing your long-term goals will help you prioritize how you will use your severance, after you land your next job (or income-producing gig). Knowing these goals will motivate you and help you resist the temptation of spending your severance.
The first principle is the easiest to do in my opinion, but I realize that it can also be the hardest. This is because it’s tempting to spend the severance, especially if it comes to you in a lump sum payment. But remember – if you received a severance, it’s likely that it’s not your only source of income right now. You may also be eligible to apply for and receive unemployment income. If your job loss was due to the coronavirus pandemic, you might be eligible for Pandemic Unemployment Assistance (PUA). And depending on how much your unemployment or PUA payments are, you can supplement those funds with part-time work. And if you have a spouse or partner who is still working, that automatically represents a source of income that can help sustain your household expenses.
The second principle – knowing your long-term goals – may require some thought. If you’re naturally goal oriented, you can automatically name a few things that you’d like to accomplish, like paying off your car, starting an emergency fund or funding a renovation for your home. But if you don’t regularly think about your long-term goals, set aside a few moments to do so.
Start by writing your goals down.
If you don’t enjoy writing, cut out a few pictures and make a vision board. This is a fun and easy way to visually place your goals in front of you.
But if all that still seems too lofty, read this sentence aloud and fill in the blank:
“My life would be less stressful if I could…”
How you complete that sentence will reveal what is most important for you now and (potentially) in the long term.
Starting with these two principles – not spending your severance payment right away and thinking of your long-term goals – will guarantee that you maximize these very special funds. Please read Part 2 of Maximizing Your Severance Payments to receive additional tips.
Always pulling for you,