Next up in our review of CNNMoney.com’s best money tips ever series is Gwendolyn Sykes, Chief financial officer of Morehouse College and former CFO at Yale University and NASA. As was the case with many of these, I like the advice she got quite a bit better than the advice she gives. Let’s dig in. From the article:
Best advice I can give: Many people who have been laid off start looking for a new job right away, but sometimes it’s better to go back to school for additional training and education. When the economy does turn around, the opportunities are going to be there for people with new skills and additional bandwidth.
Best advice I ever got: My mother told me that a girl should always have a rainy-day fund. She never specified how big (that’s something I figured out on my own later on). But her advice is certainly applicable today.
In the economic downturn, the advice to have three months of expenses put away has stretched to six months of expenses. I have a year’s worth of salary put away.
My take:
It’s not that I disagree with her advice, necessarily, but it can be dangerous. Sure, expanding your skill set can be a good way to take advantage of a little down time in the economy or a career blip. But that can be done in a number of ways - with or without a job. Here’s a little bit more about my thoughts on that, which I posted earlier this month. So yeah, maybe a (or another) degree is the right answer for you. Maybe a Rolls Royce is the right choice. But maybe you only need (or can only afford) a Honda. Or maybe you only need (or can only afford) a bus ticket!
So maybe a certificate program is for you. Or maybe it’s night school while you find and work a new gig. Or maybe it’s something online. Going “back to school” is not the only “expanding your skill set” option!
The advice she got is slightly better, but a little too loose for my liking. Here’s a little bit more about my emergency fund thinking. In short, I think your emergency fund should get you through at least one year. So single-income families should have at least one year of expenses set aside. Dual-income families should have at least six months set aside (so if you lose half of your income you can use the one income left and your emergency fund to last at least one year).
Bottom line:
I’m not very excited by this advice. I find the advice she gives as potentially dangerous. I recognize that she uses the phrase “sometimes it’s better,” so she’s not recommending this for everyone. And it’s good to hear other ideas – somewhat “outside the proverbial box” ideas – that some people may not think of.
And I agree that an emergency fund is key, but we disagree with the right amount. I guess it’s nice to hear she has one year set aside….
So I guess the best thing I can say is that “it’s the thought that counts.” I agree with her ideas in general, but I’m not totally on board with the details (or lack thereof) of the substance.
What I do know is that if you lose your job or it starts to rain, there is one thing that is a lock to helping get through a tough financial time. Yep – you guessed it. Put your credit card down and slowly step away from the mall!
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