How To Budget When You’re Unemployed

Budgeting wasn’t exactly fun, but it was probably easy enough when you were employed. Once you’re laid off, almost every aspect of your budget has to be re-evaluated to see how expenses can be cut and income maximized. Learning how to create a budget in bad times can be the start of your financial education that has a lasting impact. It can even help you start to develop a wealth consciousness where before you just were simply too busy to pay attention to every facet of your daily finances.

The Blessings of Budgeting In Bad Times

Budgeting in bad times can give you a clear view of whether every penny you spent when you were working was well allocated or not. It may have seemed like no small thing to add a cable program with multiple movie, special news, and entertainment channels, then, but now it’s obviously a luxury. If you can learn to cut out the expenses that you thought were essential back then, you’ll be creating frugal habits that should last when you finally get another job. You’ll never look at your discretionary income the same way. In fact, it may even give you the motivation to always have at least six months, if not one whole year, of expenses put aside when you’re working for the possibility of another layoff.

Focus on the following:

Cut the fluff - Don’t wait until the last minute to make the cuts that can save you money now. The extra months of no expenses will add to the time you can live without a job, so make the sacrifice now. If you can a job sooner than expected, all you got to do is re-evaluate those services and turn them back on if you want then, when you have the money for sure. Here are some examples of fluff that many families overlook when it comes to cutting expenses: more than one phone line, more than one car, cable television programming, membership dues, magazine subscriptions, and eating out at restaurants.

Review your insurance policies - You can reduce your premiums if your house value has decreased, your car is old, or you are not driving as much and keep the car garaged more. You can opt for catastrophic health insurance coverage, in the event of terminal illness while you’re unemployed, and keep the maintenance costs down. You can also just opt to go with your spouse’s health insurance plan, if they are still employed.

Shop around for essential services - Not every cellular phone provider requires a yearly contract, late fees, and termination fees. There are prepaid phones that can help you avoid these fees, although they charge more per minute, in some cases. Always seek the best bargains on clothing, food, Internet (which you’ll need for job searching) and even automotive repairs. Do your research online and combine it with online coupons or rebates to help reduce costs further.

Prioritize your emergencies - A sick kid takes immediate priority. A stained and damaged carpet, while looking awful, can be lived with until the situation improves. One can even live without air conditioning in some areas of the country, if the unit breaks down, despite the odd notion by some people that it is a basic necessity of life. Life tends to throw us things from all corners, it’s just a question of which emergencies need immediate attention and which can wait.

Reduce your temptations to spend - Whether it’s Christmas or Valentine’s Day, family obligations, or your kids whining about the latest and greatest electronic gadget, try to reduce the impact on your pocketbook. Be aware of what triggers you to buy and then simply opt out. No one will take you into court for child abuse just because little Johnny didn’t get a PS3. Learning to say no can help to lay financial boundaries and reduce your stress during these difficult times.

Develop new paying skills - It can’t be said enough, you have to learn to create income besides just having a job. We did it when we were younger, but got complacent when we devoted ourselves to one 9 to 5 job. Now’s the time to dust off those alternative ways of making money and implement them. You can supplement your unemployment with some additional side money as long as you don’t exceed your weekly benefit. There are rules, and you should check them out carefully with your unemployment office before you take a part-time job or freelance gig. However, if done right it can help to extend your own benefits with more time to reach the maximum payout.

Defer student loan payments - If you have student loans, they might be hard to manage while unemployed. Talk to your lender about a forbearance or deferment. You might even qualify for the income-based repayment plan while you’re unemployed. It may take some time and paperwork to negotiate, but it can definitely provide breathing room in your budget.

Re-evaluate other sources of income - Do you have child support, alimony, rentals, or even investments? If so, now is the time to look at these and see if you can get them modified to help support you more during a time when your income has drastically changed.