Financial Tips After a Job Loss
Concerned about managing your money while you look for work?
If you qualify, unemployment benefits will help replace a small portion of your normal income for a limited time. Here are some tips for staying financially healthy while looking for work.
Create a Personal Budget
- Expect to pay income tax on your unemployment benefits. You can have this automatically deducted from your payments.
- Avoid using your savings or retirement funds to live on. It takes a long time to rebuild these again. Plus you may need to pay for a tax penalty of you withdraw money from a qualified retirement plan.
Manage Your Budget
Cover your basics first. Necessities include housing, utilities, food, work clothes, transportation, insurance, and other bills you must pay. Then identify where you can reduce your spending:
- Try to arrange for lower monthly payments by telling your creditors that you are unemployed.
- Trim your bill for everyday necessities by buying generic brands, shopping sales, and using coupons. Buy in bulk. Make a shopping list before heading to the store and stick to it.
- Consider alternative transportation. Cars can be expensive to maintain. They cost gas, insurance, fees, upkeep, parking, and repair. Not using a car, cutting back to one car, or using public transportation could save you money.
- Reduce or eliminate your phone, cable, and Internet expenses. Contact your present provider. Let them know you are shopping around and ask for their best price. Bundle services, but read fine print before signing up for a multi-year contract. You could be hit with large penalty fees for breaking the contract or changing your services.
- Cut back on luxury items. Look at your dining, entertainment, hobbies, memberships, household, and personal care expenses. Sell and avoid buying items you don't need.
Borrow Money Wisely
- Don't use loans for anything beyond your basic necessities.
- Reverse mortgages and home equity loans will remove value of your home with interest. They do affect the resale value if not repaid. If you can't repay your loans, you may face foreclosure or credit problems.
- Review these basic rules if you must borrow money from friends and family.
Carry Health Insurance
Medical bills can be very expensive without health insurance. Don't risk it. There are ways to continue medical coverage after a job loss.
Limit Credit Card Use
Use credit cards for emergencies only. Charge what you can afford to pay back within a reasonable time frame. It is easy to get overextended.
- Avoid transferring balances from one card to another one. Balance transfers often have higher interest rates, often after a low introductory rate. Some cards charge transfer fees. Plus your payments may be applied to the balance with lowest rate balance first.
- Living beyond your means on credit cards now may cause serious credit problems later.
Find Other Sources of Income
There are a number of creative ways to make additional money.
- Part-time or temporary jobs may be easier to find than full-time work. Turn a hobby or skill into a moneymaker. Think about self-employment possibilities. Deliver pizzas or newspapers. Hire yourself out to mow lawns, shovel driveways, run errands, or do home repairs. If you are on unemployment insurance, understand what affects your benefits.
- Borrow, trade, or barter for items and services you need.
- Let your family help out. Spouses may be able to find work or increase their hours. Work opposite shifts to avoid daycare bills. If teens are old enough to work and can find a job such as retail, fast food, lawn mowing, or babysitting, they can cover some of their own expenses.
It can be tempting to seek out ways to make money quickly, so be especially aware of investment scams.
Get Financial Counseling
There are many local financial counseling resources. They can help you learn how to consolidate debt and manage your budget.
Continue Your Job Search
Let people know you are looking for work. They can help you network and find job leads. Don't wait until your unemployment benefits end to start looking for work. The sooner you get back into the workforce, the better.
For more tips, read the "Your Income Decreased. Now what?" blog article series: