Dumb, and smart things, to spend $54,000 severance on

Closed NUMMI auto plantAn auto plant in Fremont, Calif. that may have saved the U.S. auto industry when it reorganized in 1984 is closing this week, giving its 3,700 union workers an average $54,000 severance as it lays them off.

The 4,700-employee plant, called the New United Motor Manufacturing Inc., or NUMMI, is closing Thursday as a joint venture of Toyota and General Motors. The average severance package is based on 15 years of service. At the top of the range -- workers with 25 years at the factory -- the package is $68,500.It's a big chunk of change to get at once, and the auto workers should take their time deciding how to use it. I got three months' of severance when I was laid off two years ago as a newspaper editor, and after seeing about a third of it quickly taken away for taxes, I put the rest in a savings account and lived off of it while looking for work.

But it's tempting to go crazy and have a little fun. Here are some things that $54,000 can buy in this rough economy:
  • An ugly backpack designed by a creative director at Louis Vuitton that looks like a waste of money.
  • A jail is being sold in Minnesota.
  • A fort for the kids. After spending that much money on a play structure, you might end up living in it.
  • A 60-year-old bottle of whiskey.
  • Advertise on Perez Hilton's blog for a day.
  • Used speakers advertised on eBay as being in perfect working condition.
  • Foreclosed home in Florida.
  • Fine for copyright infringement of 24 songs.
Of course the smart thing to do is to pay the bills, get some job training after 15 years of putting Toyotas together, or simply put it in the bank and act like it doesn't exist. A mortgage can quickly knock the sense out of spending a severance package on a trip to Europe.

Investing part of the severance in a business seems like a smart idea so that not all is lost if the business goes south.

Ron Brandon, 43, of San Jose, Calif., worked at NUMMI for 18 years and expects to get a $50,000 severance. Brandon said he plans on spending no more than $10,000 on a mobile repair service for motorcycles. He owns 14 motorcycles and restored vintage bikes before joining NUMMI.

Starting a business with severance money is becoming more popular as companies let people go during the recession. Some, such as Alison Hinson, use their severance to start their own business and are successful. Hinson got about $28,000 in severance when she was laid off at L.L. Bean nine months ago. It was a valuable safety cushion to pay the bills until her consulting business started paying off.

Janice Williams started a home tutoring business, the Tutor Doctor of New York City, after getting a severance of less than six figures a year ago from Pfizer, where she worked for seven years and earned $150,000 per year. Williams started the business in October and is now collecting a salary from it while sending out 12 tutors to students' homes.
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