Wednesday, April 25, 2007

Quit-lag

Life changes rarely happen alone. I mentioned here the birth of my daughter in February. My mother-in-law has been staying with us since then. However, she’s leaving next week. After some long discussions, my wife and I decided that I’ll be the one staying at home to take care of our daughter for a couple of years.

There are many, many dimensions for this decision. Foremost on our minds is the well being of our daughter. I’m thrilled with the prospect of spending time with her and teaching her all I know. There are obvious financial implications in this decision given the loss of my income and associated benefits. Fortunately, my wife has a good job and supports my decision.

Looking at salaries alone, it would make more sense for my wife to stay at home instead if one of us has to. However, I’ve been mulling a career change and this is a great opportunity. As a research scientist I’ve built up expertise in a narrowly focused field that is, unfortunately, not very transferable. My wife, on the other hand, has a job that is in demand in most of US. Furthermore, my job demands a greater amount of time commitment than my wife’s. So we agree that it makes more sense for me to do this now and restructure our life for maximum flexibility down the line.

I’ve been writing mostly on concrete options in investing/personal finance, but big picture issues like where to live and what kind of job to take actually have far greater influence on the quality of life and overall well-being. Unfortunately, most of us are so bogged down by the pressures of daily living that we feel powerless in affecting our situation. For our working lives, my wife and I have been living beneath our means and investing diligently. We were not delaying the instant gratification of buying NOW in order to hoard, rather we were acutely aware of the freedom that a solid financial foundation can provide. It’s this freedom we’re cashing-in now.

Quit-lag mode
I’m leaving my company on very good terms. There is no sense burning the bridges even though it’s unlikely that I’ll go back. I gave more than a month of notice although my employment contract requires only two weeks. It’s also unusual that management let the news out over three weeks ago. I guess it was because I have a large number of tasks to hand over. Anyway, I have been in this quit-lag mode for a while now. This was a term that I first came across in this Business Week article. A quote:

When I went back to my desk, the piled-up papers looked like annoying debris. Now that I was leaving, my projects-in-process were meaningless to me. But I had two weeks to kill, so I went to work. I started creating a manual for the person who came after me. I wrote down procedures and lists of contacts and important events coming up in the future. That took about three days. Then I got to work cleaning house.

I threw out papers and cleaned out files. I reorganized employee records and made sure vendor contracts were current. I walked around the office and visited employees who had pending benefits issues or other matters that needed attention. Boy! they said. You are really on the ball this week! Heh, heh, I said to myself. What else do I have to work on?

I’m not sure if I was that much more efficient. But I’m certainly no longer sweating the things I can’t control. Several people commented on that I look relieved, and that’s on about six hours of discontinuous sleep per night!

Preparations for leaving
I’m not sure how common my experiences are, but I want to share my financial to-do list nonetheless.

  • I got supplemental disability insurance. The disability coverage (65% of income, to age 65) I receive through my employer will end shortly, so I work with an agent (my sister-in-law actually) to get some supplemental insurance. You may have to do this well ahead of the final date.
  • I re-read my employment contract so I’m clear on my rights and obligations.
  • I still have company stock options that I have 3 months to exercise after departure. I have been exercising them gradually this year. I will continue with cash-less exercises at certain price targets. I decided against exercise-and-hold because of the AMT implications and the high expense of put options I would need to purchase to guard my profits.
  • I set aside one year’s worth of cash needed to pay for living expenses (in addition to my wife’s income) and put it in our HSBC online savings account.
  • I started investigating income generating securities. [If you were wondering why I was writing about those high yielding closed-end funds, this is why.]
  • I started a self-employed 401(k) account at Fidelity in preparation for rolling over the 401(k) at work. [See why I’m not rolling it into an IRA here.]

Friday is my last day at work. This is going to be a whole new experience for me. Wish me luck!