How to Manage Your Finances When You Are Unemployed

If you are unemployed, or even just experiencing a reduction in income, keeping track of your finances and making a budget are even more important than ever. With a limited amount in savings and little to no new income coming in, you are going to have to make some hard choices and sacrifices.

Losing a job is devastating, but it is important for you to take stock of your finances immediately so that you can prevent a bad situation from becoming even worse. You should make a budget plan with your family and decide how you will handle your bills and expenses while you are unemployed.

Becoming unemployed does not necessarily mean you will lose all of your income. In many cases, you can receive unemployment benefits. The amount you will get depends on how much you were making before you lost your job. The length of time you will get unemployment checks varies, so check with your state unemployment office.

You may also have other sources of money such as a savings account, severance package, dividends, residual payments or royalties from previous work, a temporary part-time job or income from another member of your family who is still employed. Look at all sources of potential income to find out exactly how much money you will have to work with while you are unemployed.

Unless you absolutely know you will have a job in the near future, you will have no idea how long you will need to make your money last. Eliminate any and every expense that is not absolutely necessary to make the money you have last as long as possible. Write down everything you spend money on, even the little things, and decide what you can cut out. Cut down your expenses until they are lower than the amount of income you expect to be getting. Make a budget and stick to it strictly.

Keep in mind that your other sources of income are not guaranteed to always be there. Employment benefits do have a time limit and other members of your family may lose their jobs as well. Also, emergencies happen, and those unexpected expenses seem to occur at the least opportune times. Make sure you plan ahead and have enough wiggle room in your budget to cover these types of things.

Being unemployed means you will have to make some sacrifices. Your family may object to many of these changes, but try to help them see the big picture. The money that you save by cutting out nonessential things can be used to keep the roof over your heads and food in your mouths. Help them understand that these sacrifices are necessary and won’t last forever. Here are some ways you can cut your expenses when you are unemployed:

• It goes without saying that major purchases, such as cars, TV’s and home renovations should be put off.
• Don’t get pedicures, manicures, perms, hair coloring or any other salon treatments that aren’t absolutely necessary.
• Make your dinner at home instead of ordering a pizza or going to a restaurant. Your spouse and children can brings lunches and snacks from home instead of buying them at school or work.
• Buy inexpensive foods and use coupons. Instead of buying heat-and-serve meals or prepared foods, learn how to cook with simple inexpensive ingredients that you can buy in bulk like rice, pasta, potatoes and beans.
• Lower your utility bills by turning off the lights when you are not using them, taking shorter showers, loading your dishwasher and washing machine to full capacity and using insulated curtains or blankets over the windows so your heating or cooling unit doesn’t have to run as long.
• Conserve the gas in your vehicle. Limit shopping to once a week and plan your trips so you follow the most efficient route. Set up carpools for things that you have to drive to regularly.
• Despite what your kids say, cable and texting plans are not essential. Reduce or eliminate your phone, cable and internet. Remember, that your unemployment is temporary and you can turn these things back on once you get a job. You and your family will survive without cable, but food is a necessity.
• If you have student loans, you may be able to have the payments deferred for several months with no effect on your credit. Interest will still accumulate on the amount that you owe, but you won’t have to pay the monthly bill during the time it is deferred. Call the lender who holds your student loan for more information.

When you are unemployed, you may not have the money to pay all of your bills every month. If money is short, you should pay the most important bills first. You should first pay for your food and essential medical care because you need to stay healthy. Next comes your mortgage and utilities because you need somewhere to live. Third comes your car payment and gas because you will need a car to get to job interviews and work. Only pay for your other bills after these essential ones are paid.

Creditors may begin to call you regarding other debts that you aren't able to pay, but don't let them pressure you into giving them money before you have covered your most important expenses. Don't worry about how your credit score will be affected. Right now your only worry should be making sure you have the basic necessities covered.

If your unemployment lasts longer than expected or you don’t have much money to work with from the beginning, you should be proactive in talking with your creditors. Some creditors may be willing to work with you, especially if you contact them before you actually start missing payments. You may be able to defer or reduce your payments temporarily or get a lower interest rate to make your payments more manageable. Not every creditor will be flexible, but it doesn’t hurt to ask.

Help for People Without a Job

There are several community programs available for people who are experiencing financial hardship due to unemployment. If you are having a hard time providing food and medical care for your family or heating your home, you may be able to get help paying for these. You may also be able to take advantage of skill training, resume writing and job hunting workshops. Contact your local unemployment office or social services to find out what your community offers.