Once again, my favorite money-management newsletter comes to the rescue for those of you struggling with your finances after being laid off. I read the newsletter from T. Rowe Price religiously every month, and when I come across something worthwhile, I like sharing it with you guys. While there are many things people can do before they get laid off that can help with financial security, not many think about what they can do after they lose their jobs – and that’s where these 4 tips come in to play. For me, my biggest tip is to have an emergency fund that you constantly add to…it goes a long way to making you feel like you would be OK for a while if you lost your employment. But here is what the guys over at T. Rowe Price have to say, along with my thoughts on each:
Evaluate your expenses
Pretty obvious, right? But you would be surprised at how many unemployed people are still paying for cable TV, newspaper delivery, expensive cellphone plans, etc.. The first thing a recently unemployed person should consider doing (if they haven’t done so already) is to create a detailed budget to track every single penny that leaves their bank account. It is amazing how much we can spend without even realizing it! Of course, you have to pay for food, shelter, and insurance (if you have it), but most everything else can be reduced if you take a careful look at the expenditures.
Consider your income
The newsletter says that after you have created this detailed budget, you need to see where your financial resources are. Severance pay, unemployment, emergency funds, investments, side income – add up all of the places where you can pull money from to support yourself until you find another job. This will help give you a clearer picture of your exact situation. Also, don’t forget that the first $2,400 of unemployment pay is tax-free for 2009. You can also reduce the amount of taxes taken out of a spouses’ checks if need be, to bring more spendable dollars into your household.
Keep paying into retirement savings
I for one and not sure about this, but then again that’s why I don’t get the big bucks! I would probably still pay into my accounts, but I would definitely cut back on how much I was contributing if I was without a job. And I would try my best to avoid touching the money in the accounts to use for daily expenses, if I could help it. At a minimum, leave the money that is in there…in there. If you can swing it, consider continuing your contributions as well as you look for a new job.
Stick to the basics
Focusing on the basics of personal finance can help you get a grip on your exact situation and can help you feel more secure. Knowledge is power, they say! Besides, as the article says, when you are finally back on track with employment, imagine how good you will feel about your financial security because of the work you did while unemployed.
These are some good, solid tips on dealing with your finances if you find yourself unemployed. I wrote before about how my own brother has lost several jobs in the last couple of years due to the economy, but his emergency fund saved him every time and got him through. Because of that and my own experiences, that still remains my #1 tip for anyone – be sure to have some backup money hanging around “just in case”. What would you add to this list? Any of your own tips you would like to add?