Establishing a Budget While on Unemployment
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Losing your full-time job can be one of the most financially devastating things to happen within a family. It’s hard to plan and prepare for a job loss, so when it occurs, maintaining a strict budget that’s different from how you’re used to living can be difficult. It’s important to adjust quickly to your new budget in order to conserve as much money as possible. This allows you and your family to be comfortable during your transition period to a new full-time job. With some quick thinking and thorough budgeting, you and your family can easily make it through this transition period without cashing in important retirement funds or getting into credit-ruining debt. Here are the best ways to start planning your all-important budget as soon as you lose your job.
There are several actions to take right when you lose your job. As soon as you lose your job, it can be a shock to not receive a paycheck at regular intervals anymore. The first thing to do is look into any state or government run programs for unemployed residents. These programs can be vital to assisting with income for your important bills like the power and mortgage. While you may not be recouping the same salary you made at your old job, receiving funds through one of these programs can help you stay on your feet until you find a new job.
It’s also important to mentally prepare yourself for the new budget you’ll need to adhere to as soon as you lose your job. Credit cards, cash advances, or loans may be tempting so you can keep the same lifestyle you had before the loss of your job. However, putting yourself into debt can get you into financial trouble that can sometimes be irreversible. Instead, make a list of the unnecessary actions and outings you indulge in each month. They may include going out to eat, joining a softball league, or buying new shoes. Eliminating these luxuries from your monthly budget will allow you to focus on paying the necessities without getting into debt or spending money you’ll need for the next month.
What to do if your job search is long-term. You may have been optimistic when you lost your job and figured you would be working full-time again in a few months. Sometimes, the job market just isn’t as plentiful as you think it will be. If you’re still job searching after several months or a year, you’re probably starting to feel frustrated with the process. After performing the same job searches with no results, you may start to get desperate and think about turning to a professional agency to help you find a job successfully.
There are some agencies that are valid and have a job seeker’s best interests in mind. However, pay attention to what the agency or professional is asking from you before agreeing to anything. Job applications should never ask you for information that’s too personal, especially your financials. You should also never have to pay a job-hunting service to simply find you a job. If a company is promising an easy and fast job in a guaranteed period of time, it’s probably too good to be true.
Even if you’re still searching for a job after a while, it’s still important to leave your 401k or other investment vehicles alone. There are harsh penalties for prematurely taking out money from your investments, so it’s worth it to keep trying to stay on a strict budget with what you have. If you get to a point where you have no choice but to break into an investment fund, seek professional help and advice. A financial advisor will be able to suggest a strategy that allows you to gain access to these funds with the smallest tax liability possible.
How to take advantage of your previous company’s benefits. If you were laid off from your previous position, you may have been sent off with a severance package. This can be a helpful lump sum meant to help you make it through financially until you find a new full-time job. As tempting as it may be to continue with the same lifestyle you’re living while using this chunk of money, it’s a more responsible choice to conserve this severance package for as long as possible. Even with a hefty package, cut down your monthly budget to the bare minimum so the lump sum will last until you find a new full-time job. You never know how long it will take until you find the job type and location you’re looking for, so you should prepare to make that package last as long as you can.
Health insurance is an expense that you may now incur without a full-time job. Your previous employer may offer you COBRA, or Consolidated Omnibus Budget Reconciliation Act. COBRA is a continuation of the health benefits you had with your employer for a discounted rate. Taking on this monthly expense yourself can still be detrimental to your monthly budget. However, the price offered through COBRA for health insurance is often less expensive than trying to find health insurance on your own. The COBRA time period is usually 18 months of coverage until you’ll be responsible for finding health insurance on your own plan
Losing your full-time job can be a stressful and frustrating time. Trying to cinch your budget to match your new lower income from government programs or severance packages is tough for families. By making a new budget, conserving as much as possible, and taking advantage of your previous company’s benefits, you can make it through your transition period. If you follow these tips, you’ll survive this struggle with all investment funds intact and no debt.