Aviation careers and emergency budgeting

Maurus

Maurus

The Great Gazoo
I think this is a good time to remind people that aviation can be a fickle beast. We haven't really had a true downturn since 2008 (covid was close) and it seems that this general knowledge may be on verge of being lost.

Here is the reality of this industry.

Airlines in the post-deregulation era are some of the first places that get hurt in an economic downturn. Furloughs can be devastating. Bankruptcies even moreso.

ATC is going through a tough time right now. Government shutdowns are becoming common and are a threat every single year. A once "safe" job now could result in months of a delayed paycheck.

If you work in aviation it would greatly improve your life in a downturn if you save at least 6 months worth of expenses in an emergency fund of some sort. This is just a general rule and can change based on circumstances.

Anecdotally I have been seeing regional pilots get stuck. I jumpseat on RJs from time to time and I run into young CAs that say that they can't take a pay cut to go to a legacy and may defer flowing as a result. Seriously, a regional CA with a goal of going to a legacy can't afford to go to the legacy. Why could this be? What would happen to this CA if/when there is a downturn in the industry that could impact them financially?

I will say this money isn't intended for you to sit in your butt until you get recalled. Furloughs can last for years. It is intended to give you time to find other sources of income and change your habits so you can at a minimum stretch the time you have with your savings.

I have been fortunate to not get furloughed in my career but this is advice I have been given on this forum by those that have been furloughed, downgraded, merged, etc etc. Even though I currently am considered to be at a seniority that is very highly unlikely to get furloughed I still keep a good chunk of change in a high yield savings account. Right now I am a CA at a Legacy. Tomorrow I could be sitting right seat in our lowest paying jet on reserve.

Plan ahead and protect your future self.
 
The Capt that is stuck probably has a mortgage on a nice house, a couple cars on payments, and two kids with one on the way. As much as real estate has been good to me and I'm a big fan, I didn't buy my first house until I was at a legacy (well, it wasn't really a legacy back then but it grew into one). Better to hold off on a mortgage and kids until off probationary pay at a major.
 
CoffeeIcePapers said:
This is relevant to anyone in any field, really.
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Absolutely, but I do believe that in a field like ours it is more imperative that people get their finances in order right off the bat. Once thousands of furloughs occur you will be put into a world full of jobless pilots and operators that may not hire you due to the risk of a quick recall.
 
Maurus said:
Absolutely, but I do believe that in a field like ours it is more imperative that people get their finances in order right off the bat. Once thousands of furloughs occur you will be put into a world full of jobless pilots and operators that may not hire you due to the risk of a quick recall.
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You're not special. Aviation is no different than any other industry. Saving money is good advice for everyone.
 
JordanD said:
Not sure if COBRA applies during a furlough but don’t forget to budget for some healthcare too. Paying for insurance 100% on your own is ludicrously expensive.
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The one time I tried to use COBRA it was $900/month and that was just for me and didn't include my wife. I was actually able to find a more affordable alternative on the open market. I'd of dropped it altogether if the tax penalties were less than the actual cost of insurance.
 
I think budgeting is more important than an emergency fund. If your monthly expenses are super low it is easy to save money for the future in assets. Generally it isn't likely an emergency will be so sudden you're not able to access these funds or pay off a credit card within a single payment period. Also, unlike an emergency fund you are not losing money every year due to currency debasement.
 
BEEF SUPREME said:
I think budgeting is more important than an emergency fund. If your monthly expenses are super low it is easy to save money for the future in assets. Generally it isn't likely an emergency will be so sudden you're not able to access these funds or pay off a credit card within a single payment period. Also, unlike an emergency fund you are not losing money every year due to currency debasement.
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That’s pretty bad advice. It’s very easy to put money in a low yield, fairly liquid account, that keeps up with inflation.
 
jhugz said:
That’s pretty bad advice. It’s very easy to put money in a low yield, fairly liquid account, that keeps up with inflation.
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It depends on at which rate you believe your fiat dollars are being debased. A year of expenses would be what 50K just sitting in cash? Or in a money market account at 5 or 6% Seems like a lot of opportunity cost to me.
 
knot4u said:
You're not special. Aviation is no different than any other industry. Saving money is good advice for everyone.
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Aviation is certainly different in many ways. A seniority system with recall rights being one of the big differences. I didn't say we were special, just that we need to be more careful.
 
BEEF SUPREME said:
It depends on at which rate you believe your fiat dollars are being debased. A year of expenses would be what 50K just sitting in cash? Or in a money market account at 5 or 6% Seems like a lot of opportunity cost to me.
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Perhaps but you have to remember that an economic fallout will include a potentially large drop in your investments thus leaving you with far less money than you expected. Imagine how investing your emergency funds in the stock market would have worked out in 2008. That 50k would have turned into 25k overnight.

Of course we know you enjoy your crypto nonsense. Crypto crashed harder than the stock market in 2020 and took much longer to recover and even crashed harder a couple years later. Likely due to the fact that it is purely speculative by nature. If investors get spooked crypto will suffer losses as well. It isn't a safe haven like the evangelists like to advertise.
 
Maurus said:
Perhaps but you have to remember that an economic fallout will include a potentially large drop in your investments thus leaving you with far less money than you expected. Imagine how investing your emergency funds in the stock market would have worked out in 2008. That 50k would have turned into 25k overnight.

Of course we know you enjoy your crypto nonsense. Crypto crashed harder than the stock market in 2020 and took much longer to recover and even crashed harder a couple years later. Likely due to the fact that it is purely speculative by nature. If investors get spooked crypto will suffer losses as well. It isn't a safe haven like the evangelists like to advertise.
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Crypto is highly volatile and cyclical. I’d agree it’s a bad place to keep an emergency fund.

Not all assets are crypto or stocks. Your emergency fund is being debased at a rate of around 14% a year. That’s not very good risk management.
 
BEEF SUPREME said:
Crypto is highly volatile and cyclical. I’d agree it’s a bad place to keep an emergency fund.

Not all assets are crypto or stocks. Your emergency fund is being debased at a rate of around 14% a year. That’s not very good risk management.
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I’d love to see the math on this. Inflation is at about 4% per year. Debasement is only being pushed by crypto grifters to sell the MLM pyramid scheme. As long as you put the savings in a money market mutual fund, you’ll keep up with inflation.
 
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