Warren Buffett once said, “When the tide goes out, you see who is swimming naked.” In other words, when times get tough, we find out who was cruising through life without a financial safety net. It’s a great metaphor for investing, but let’s be honest—it applies to all of personal finance. Because when financial waves crash, like a potential job loss, nobody wants to be caught… well, exposed.
The Bigger Picture: Financial Security and Federal Buyouts
We financial planners love this quote because it’s not just about the stock market—it’s about life. If you suddenly lost your job, could you still pay your mortgage? If the worst happened to your spouse, would your family stay afloat? If an emergency struck tomorrow, would you have a plan—or just a lot of crossed fingers?
For years, the tide has stayed high for most federal employees’ steady jobs, reliable income, and solid benefits. But lately? The waters feel a little choppier.
For federal employees, the landscape is shifting. The recent news about the ‘buyout’ and potential job eliminations has created anxiety, confusion, and anger, and rightfully so. Suffice it to say, job security for federal employees may not be as guaranteed as it once seemed.
So, Are You Swimming Naked? Better Check.
Now, there are plenty of articles written about the buyouts, and about as many written about the future of the buyouts. I’m going to leave the nuances of “should you take it” to those articles.
For me, and my clients, I’m singularly focused on answering the question…
Are you financially secure if ….(insert bad thing)…. happens?
Or more to the point…
- Are you financially prepared for job loss?
- Are you financially able to take the buyouts?
- Are you financially prepared for the increased lifestyle costs if you need to return to a physical office 5 days a week?
Focusing on the largest worry—a job loss. Because here’s the truth—an extended period without income is the single biggest financial risk you can face. If you’re smart, you’re doing a quick “financial wellness check” right now.
We can’t predict the future, but we can prepare for it. Let’s talk about two steps you can take to make sure you’ve got something on when the tide inevitably goes out.
Step 1: Upgrade Your Emergency Fund (Because 3 Months Won’t Cut It)
Conventional wisdom says to keep three months of expenses in an emergency fund. That’s okay—for minor inconveniences.
- Need a new furnace? Emergency fund.
- Car totaled? Emergency fund.
- Your kid totals the new car with the new furnace? Yep, emergency fund.
But the real risk is being unemployed for months (or longer). Our recommendation is to keep full years’ worth of income in liquid assets, not necessarily in a low-interest checking account, but somewhere accessible (read: not locked in your TSP or IRA).
Imagine making $100K and having $100K saved in liquid investments. Would you feel different about buyouts now? Probably. Instead of panic, you might be thinking, huh, maybe I take that money and finally start that alpaca farm…
So how do you get there from here? This may sound blasphemous, but you may need to save less in your TSP to accomplish this goal. Yes, I said that.
Would you trade more financial security now for a little less in retirement?
Hear me out. I remember working with clients during the Great Recession of 2007-2009, when many faced job losses that stretched beyond their three-month emergency fund. To survive, they were forced to take early withdrawals from their retirement accounts, paying both taxes and penalties to keep their families afloat while the market was down more than 40%. Ouch.
When viewed in this light, allocating more money into short-term savings can serve as that bridge between jobs and serve as protection for your retirement assets.
Most people don’t even meet the three-month standard because they’ve been lulled into a false sense of security. Time to rethink that.
Step 2: Know Where Your Money Goes (No More Mystery Expenses)
As someone who works exclusively with federal law enforcement professionals transitioning into retirement, I am constantly amazed at how few people actually know what they spend.
I’ll ask clients ready to retire, “So, how much do you need per month?” and get a shrug. I think of FERS Retirement as a permanent buyout, yet most base their needs on a hunch.
That’s why the first thing we do with clients is cash flow planning. Not so they can cut back on everything and live off ramen, but so they can be smart about spending. I define smart as your spending reflects your actual priorities and resources.
You might not be taking the “permanent buyout,” but the lesson is applicable right now.
Here are four quick cash flow wins you can probably grab right now:
- Find the forgotten expenses. That free trial you signed up for six months ago? Still charging you. Subscription services can accumulate over time. Many people sign up for trials, whether it’s a streaming service, magazine, or monthly subscription box—and forget about them.
- Clean out the garage. Maybe you have a gym or golf membership you rarely use, a boat you take out twice a year, or a time-share gathering dust. These expenses may not need to be eliminated immediately, but if the rumors are making you nervous, reconsider these expenses. Are they important?
- Discover the “whoa, we spend THAT much?” expenses. It never amazes me just how much things cost. For me personally, dining out is a common culprit, and I don’t think I’m alone. We have three kids, and the meals add up. When we take people through this exercise, some are shocked to learn they spend over 10% of their income on restaurants! You may or may not be overspending, but now is the time to certainly find out.
- Calculate your survival number. This is the amount of truly essential expenses—mortgage, food, utilities, and other necessities—that you need to cover each month. If faced with job loss, knowing this number helps you understand exactly how long you can sustain yourself financially.
Even if you don’t anticipate taking the buyout or worry about job loss, these exercises can help you become more financially resilient.
The Final Takeaway
We’ve been working with federal employees for twenty years, and like you, we’ve never experienced anything like this. People are understandably nervous, and rightfully so. But Warren Buffett’s timeless wisdom reminds us that the tides will eventually turn.
When they do, you’ll either be prepared and secure or caught off guard. Right now, for federal employees, the tides are definitely shifting. Let’s use this moment to strengthen your financial plan. It’s never too late to take proactive steps that can prevent future financial stress and give you the confidence to face whatever lies ahead.
