8 Personal Finance Management Tips for the Unemployed

The following is a guest post by Tom Becker from Money Choices. 

When you lose your job, it might feel like all reason for keeping up with your personal financial management may be lost. With no job and no steady income, the situation could appear bleak, but this is the time when you must prove your financial acumen, suck it up, and come up with a plan to make the most of your available finances. With some careful planning and efficient use of your money, you may still be able to keep yourself afloat for a reasonable amount of time even without steady work. Here are eight tips to help you manage your money while you are unemployed.

1. Take Stock: One of the first steps you might consider after a job loss is taking stock of your available assets. Take an inventory of what assets you currently have available, what will be coming in (i.e. last paycheck, severance checks, unemployment checks, etc.) and for how long, and what might be converted to cash in an emergency.

2. How Much Cash Do You Have?: Once you have an inventory of assets, it’s time to get an accumulated tally of how much you have or will have on hand. You’ll probably need an idea of how much liquid cash you will have to tide you over until you find another job. Things like retirement accounts, stocks, bonds, and other investments that won’t be easily convertible to cash may act as a type of reserve fund that hopefully you won’t have to touch but will be there if you’re strapped for cash.

3. Set a Timeframe: While setting a timeframe for how long you will be out of work could be difficult, it’s important to at least try to estimate one so that you can begin preparing yourself and your finances. For someone in the healthcare industry this timeframe could be relatively short since jobs are plentiful, which might mean you only need to prepare for a month or two without work and may not require much financial planning. For a person who was working in the assembly line of a car manufacturer though, the duration without a consistent paycheck might be much longer, calling for an entirely different timeframe and plan.

4. Review Expenses: No matter what your expected timeframe for being without work, it might not be a bad idea to review your expenses. Having a good grasp upon how much you spend and upon what can be a great way to get a better handle upon your spending. Such a review can also pinpoint areas of excessive spending and places in which to cut if needed.

5. Build a Budget: Building a budget can help you through a period of employment by assisting your to get a grasp upon just how much you can spend during your time away from work. This is where steps such as knowing how much liquid cash you will have available, how long a period you may be without work, and what your expenses are can help you to formulate a more accurate budget. Once you have a budget created, you can compared how much money you have available to what your expected expenses will be in order to see if your timeline for surviving your work outage is accurate.

6. Reduce Non-essentials: If, once you have built your budget, you realize that you may not have sufficient funds on hand to last as long as you had hoped, won’t have enough money to meet expenses, or feel that you need to extend your timeframe a bit, it might be time to reduce non-essential items. Things like cable, phone, entertainment, even food expense lines might be areas for review when it comes to reducing expenses and stretching your dollar.

7. Cut, Cut, and Cut Some More: Now that you’ve sliced the cable bill, and diced the cell phone bill, it’s time to get down to the nitty gritty. It might be time to start looking for ways to reduce utilities like the natural gas or electric bill. You may be able to trim food costs by buying generic or store brands. No matter how much your cut away from your non-essential budget expenses, it can still be important to look for additional ways in which to slice an extra dollar off your bills here and there until you get back to work.

8. Search for Temporary Income: While reducing expenses is one way to better manage your finances during unemployment, you may also want to search for sources of extra income. Whether picking up some side work as a freelancer, taking some belongings to resale shops, having a garage sale, or whatever, every little bit of extra income during a time of unemployment can help.

Comments

[Tyler]

Time Frame- do your analysis as listed above, then double it. I give the same advice to people who are starting their own business- if you think you will start making money in 6 months, expect it to take at least 12.

[Sunil from The Extra Money Blog]

to me all 8 points boil down to one advice - adjust and accommodate to the situation you are in. just like business strategy has to be shifted in changing economic times, personal strategy is no different. . . and you can apply that same logic for pretty much anything else

[J in FL]

As someone who is just coming out of a short period of unemployment, I can say that #2, 4, 6, and 7 are the first things you should do, like asap! My wife and I found places to cut in our food spending, gym membership, gas expenses, and others. Fortunately I was only out of work for just over one month, but if it had been longer, I think we would have found even more ways to cut spending. You gotta cut spending drastically if you don't have much of an emergency fund built up (our case, since we both have only been working for a short time.. just starting our careers).

[Mark Erickson]

Great advise for so many that have lost their jobs in this economy. It is surprising how many expenses can be cut when need be. So many people are realizing how much they can do without and a new way of living that when they do get a new job and money is flowing in, they will be much smarter with their money and have more left over for savings and paying off debt.

[Mark Randall]

Great tips. Another idea is to put all your tax returns into a savings account. This is a quick way to beef up your savings account every year. Also, it is important to start cutting back right away, not after a few months when you realize you almost have no money left.