If you’ve ever justified a Target run by saying,” I only need to work X hours to pay it off”—read this.
A steady income can hide seriously irresponsible spending habits. But once you’re unemployed, and the cash stops coming in, every minor purchase matters.
The solution seems obvious: Spend less money (and find a new job A.S.A.P.). But when you’ve gotten accustomed to a higher standard of living, downsizing gets difficult. With a little planning and creativity, though, you and your bank account can survive a stretch of unemployment.
FIGURE OUT YOUR BENEFITS
Although you’re losing your salary, you’re still entitled to some benefits once you leave your job. It may be awkward, but don’t be shy. When you’re unemployed, every cent counts. Ask whether you’ll receive severance pay, what will happen to your pension benefits, and how long those benefits will last. Consider using a 401(k) rollover to transfer your company-sponsored retirement savings into an individual account as well.
Also ask how long your employee health insurance will last. If you want to stay on your company plan, apply for COBRAwithin 60 days of leaving your job. Under this law, you’ll be responsible for paying for up to 102 percent of the cost of the plan, but you’ll keep your benefits for up to 18 additional months. When you leave your job for any reason, you can also buy a Marketplace plan outside the Special Enrollment period and depending on your income, qualify for discounts on your monthly premium and out-of-pocket costs.
PLAN FOR AT LEAST 3 MONTHS WITHOUT INCOME
Hopefully, you have a solid professional network—and an emergency fund to fall back on. Even in a best-case scenario (as in: you score an interview immediately after leaving), you’ll need to allow a few weeks for interviewing, follow-ups, and background checks. According to Jobvite, the average job search lasts about four weeks and lasts even longer for executive-level positions. So regardless of your prospects, prepare for some belt-tightening.
NEGOTIATE WITH YOUR LENDERS
Your number one priority right now is paying your bills. You can defer your student loans for up to three years while you’re unemployed. If you’re risking falling behind on credit cards or other payments, negotiate with your creditors before you miss your payments and lose your bargaining power. But absolutely do not tell them that you’re not working. If you seem more likely to miss payments and your lenders will have no reason to lower your rates. After all, they make their money off your late fees.
Instead, say that you’ve been offered a better deal by another provider. Assuming that you have good credit, meaning a score around 700, you could leverage that (fake) offer to lower your interest rates, or you could delay or reduce your monthly payments. Though some creditors will turn you down, the odds are in your favor: 78 percent of people who asked their credit card companies to lower their interest rates were successful, according to a study by Creditcards.com last year.
JUST STOP SPENDING AS MUCH MONEY
Budgeting sucks, we know (here’s how to get started). But really, there’s no shortcut when you’re unemployed. You have to cut out all of your extra spending. This doesn’t mean dumpster diving, but in order to stay financially stable, you need to give up some of things that made your life more convenient, enjoyable, or entertaining.
That means sitting out of that road trip—or walking when you would’ve driven—to save gas money. Or canceling your gym membership, scaling back your beauty products, or changing your phone, internet, and insurance services if necessary. Or sticking to your strict food budget even if you’ve had nothing but peanut butter sandwiches and pasta for two weeks and you just want to eat like an adult again. When it gets hard, remember that your situation is only temporary—and it’s way easier to get over short-term discomfort than major money problems.
PLAN FREE ENTERTAINMENT
Between dinner, drinks, and Uber, the best budgetary intentions can burst in flames during a night out. But how else are you supposed to see your friends, when they’re all still making money?
Unemployment’s not a social isolation sentence, though. Plan some budget-friendly activities, like a movie marathon, potluck dinner, or free concert. If they start throwing you shade, just be real with them about your financial fears. Once they understand where you’re coming from, they’re more likely to compromise.
SIDE HUSTLE FOR EXTRA INCOME
Struggling to save money? Make more of it. You can sell your old stuff through the Internet or Facebook swap groups, perform odd jobs around your neighborhood, or participate in psychology and market research studies. If it makes sense for your skillset, also consider freelancing out your services, both for added income and a potential professional connection.
But if your side hustle performs too well, you risk losing your unemployment benefits. How well is too well? The limit differs between states—Illinois workers lose their eligibility when their monthly income exceeds their benefit payments, while New Yorkers receive partial benefits if they work less than four days, and earn $430 or less, per week. Sometimes, your second gig can be worth the sacrifice, but check out your state’s rules to determine whether the trade off makes sense in your situation.
DON’T SPEND YOUR FEELINGS
Unemployment stresses us out. People ranked money concerns their biggest source of worry in a 2015 American Psychological Association survey. And women are twice as likely as men to relieve their financial stress by shopping, as 40 percent of women in a Huffington Post survey reported that they “stress shop,” compared to 19 percent of men.
Sound familiar? No big deal, the occasional post-work Sephora pick-me-up never hurt nobody. But rationally, you probably know it’s the most counterproductive way to cope with…financial uncertainty. Try telling yourself that in the Target checkout line, though.
So if you’re a stress shopper, seek other outlets for your emotions during this difficult time. Confide in a friend or family member, or visit a community counseling center, which offer services at little to no charge.
BUT KEEP ONE (LOW-COST) WEEKLY TREAT
Don’t think of your favorite dessert, all buttery and freshly baked and…what just popped into your mind?
The same thinking applies to your unemployment financial diet. Let’s say that you’re psychologically dependent on your pre-work Starbucks (not speaking from personal experience or anything). Ideally, you’d stop buying it until get a new job. But when you tell yourself you’re never, ever buying Starbucks again, you’re way more likely to obsess over it and…you guessed it, buy a cup every single day (not that that happened to me, of course).
So give yourself one cup per week. You’ll satisfy your Starbucks addiction while still cutting your weekly Starbucks spend by 6/7.
Have you ever been unemployed? Did you find creative ways to stretch your dollars? Tell us in the comments below.
Feature image courtesy of Hello Fashion