How to Manage Your Money During a Job Loss
Most Americans live paycheck to paycheck, which means making ends meet can be difficult. Imagine how tough it would be if you had to do that without a job. Losing your primary means of income can quickly compromise your financial stability. It could mean being unable to pay some of your bills. Worse, you could end up losing your home. This is why it’s important that you learn how to manage your money when there’s no income insight, whether you’re already out of a job or just worried about the possibility. While it’s true that you may get some easy personal loans with no income verification to get you through this tough situation, there are other things you can do to help you stretch the dollars you do have. We cover some of them in the article below.
Make a Goal to Get an Income
We understand how hard it is to generate money after a job loss. However, in order to make sure that you’re able to fulfill all your financial obligations during a job loss, you’ll need to find a way to generate some income. Maybe not as much as what you were previously making, but every penny counts. Moreover, being able to earn money, no matter how little, can give you that much-needed psychological boost. You’ll feel all the better for taking action and having more control over your situation.
So, how can you earn money? Well, you can look into getting some side gigs such as becoming an Uber driver, a dog walker, or doing small jobs through Fiverr. You can opt to apply for positions that have a low barrier of entry such as those in the retail and foodservice industry. You can also consider starting your own freelance business such as an Etsy shop, graphic design services, or writing services. Another way to generate money is to start selling some of the stuff in your home that’s just gathering dust. Just make sure that after you create the plan, you follow through with it.
Create a Budget to Manage Your Money
Once you have a plan for earning money to live on, you can now turn your attention to determining how you will be spending it. That means creating a monthly budget. The first step is to review all your monthly expenses. Where does your money go? Use a spreadsheet to make it easier to track your income, expenses, and savings. With this tool, you’re more easily able to look at what adjustments you can make to balance the amount of money coming in with the amount that’s coming out.
So, what should be included in your budget? We already mentioned income; one of the key steps to efficient money management is keeping an eye on how much money you are able to spend. You don’t want to end up spending more than you make because you literally cannot afford to. You should also include all your expenses in the budget, no matter how minute. Tally the amounts to see how much of your money goes out. Then, determine which of these expenses are essential to daily living such as housing, utilities, groceries, transportation, etc. At a glance, you can quickly see how much you need to earn on a monthly basis to meet the bare minimum. Anything more than that can go to savings.
Pro tip: When making your budget, make sure to prioritize your bills. What are the ones that require full payment each billing cycle, and what are those that only need a minimum amount (i.e., credit cards)? Doing this can help prevent you from going past due on your bills, which means you won't be incurring any late payment fees and penalties (which can add another burden to an already strained budget).
How to Manage Money and Save?
After you’ve created a budget, the next step to manage money wisely is to cut back on unnecessary spending. Do away with the "nice-to-haves" or luxury items like Netflix, gym membership, magazine subscriptions, eating out, Starbucks (or any coffee not brewed inside your home), etc.
Aside from trimming your monthly expenses to only include the bare necessities, you also need to be more mindful of what you buy and how you buy. This means choosing generic brands, if possible, and taking advantage of sales and coupons. Buying in bulk can also help you save money in the long run. Get a cheaper plan for your phone. You can also look for insurance coverage that’s more affordable. Remember, you’re living on a very limited amount of money. You’ll need to save as much as you can to stretch that dollar. Having a budget and sticking to it can help you spend money more wisely and help you meet your financial obligations while you look for a job.
Avoid Major Purchases
In line with keeping your spending low, you should also avoid making major purchases while you’re out of a job. Here’s an example. Let’s say your car finally gives up the ghost. Instead of buying a new one through a car loan, why not consider alternative means of transportation? Ride a bike or take public transport. Carpool with someone. If you’re financially struggling, it makes little sense to take on more bills to pay.
Money Management and Debts
Speaking of bills to pay, you probably have some debt that needs paying. And it’s not a good idea to let payments on those kinds of bills slide. If you think you’ll have a hard time making the monthly minimum payment to these bills, then you might want to consider debt consolidation. This is when you take on a new loan to pay off all your other debts. The new loan, of course, must have a lower interest rate and a monthly payment that fits your budget. As an added bonus, there’s only one loan payment to keep track of, making it easier for you to manage your finances. In case you’re worried about where to find such a loan, you can look for online personal loans. Just remember to shop around for the best deal you can get.
Budget Planner Tools and Apps
As we've already mentioned, effective money management starts with creating a budget. A budget will provide you with a clear visual of how much money you've got coming in and where your money is going. A solid budget plan can help you handle your current financial situation while enabling you to prepare a stable financial future. Now, a simple spreadsheet can easily serve as your budget planner. But if you want to make the job easier, experts recommend that you find a budget management tool that works for you. Not only will it help make managing money less stressful, it can also provide you with easy access to your finances wherever you may be. There’s no excuse for you to stop keeping track of your money when your budget app is readily available through your mobile phone. This enables you to make budgeting a priority as well as a habit. Some budget planners sync to the cloud which protects your data and provides you with a backup should the need arise. Moreover, some tools come with extra features that enable you to grow your money as well (e.g. investments). Take note that it really doesn’t matter if you use paper and pen or the best budgeting app money can buy. What matters is that you become disciplined in sticking to your budget.
Create an Emergency Savings Fund
If you still have a job, it’s incredibly important that you start putting away money for a rainy day. The amount of money in this fund will vary from person to person. Generally, experts recommend that you should have an amount equal to three to six months’ worth of expenses in your emergency fund. This is why you should start placing money in this fund while you are still employed (or at least, earning an income). When your income runs dry, you can dip into this fund to pay for living expenses while you look for a new job.
But what if it’s already too late? Or if you just want to have the fund ready as soon as possible? Well, some people opt to apply for online loans that enable them to set aside the money right away, and then just slowly pay off the loan little by little. This is a good option only if you can get a good deal, which means affordable monthly payments and lower interest.
Apply for Unemployment Programs
Each state has unemployment programs that provide some kind of financial assistance to eligible residents. The requirements of these programs will vary, but most will include your length of employment, the reason for termination, and your previous salary. In most states, an eligible individual can get up to 26 weeks of benefits. Take note that you may have to pay income tax on your unemployment benefits. Also, depending on the state, having a side hustle can affect how much you will get.
