How to Budget After A Job Loss
Having your salary slashed or losing your job is never easy. It is a scary place to be. However, do not lose hope—it is a cliché, but it is true. You can survive this. And if you have a family, there is still something you can do to make sure they are provided for.
One of the most important things to do right now is adjusting your budget to suit the situation. It is normal to be afraid but try to overcome it with hope and courage. Here are some practical steps to help you. If you have a budget already, you need to work on cutting back some things. And if you have never had a budget, it is time to create one.
First, cover the four walls. They are your priority and include shelter, food, transportation, and utilities. Focus on paying the mortgage/rent, feeding the family, keeping the power on, and having some gas in the car. If you have been paying off debt, pause the payments. If there is a minimum required payment amount, pay that. But do not add anything extra until things get better.
Remove Unnecessary Expenses – This will be difficult. But if you now have a lower income, your expenses should also be less. Maybe give up streaming services or cable. You could also aim at reducing the cell phone bill. Look at your subscriptions. If something is not necessary, cut it. Only focus on essential expenses. Let meal planning become your new normal. This will greatly lower the grocery budget.
Even in Unemployment, Make Money – Whether you have been laid off, had your hours cut or are on furlough, do not forget that you have other opportunities. Find another job, either in your field or wherever you can find one. Have an open mind. Let these two things cheer you up: Some people become happier after losing their job. It is an open secret that many people do not like their jobs.
Being laid off is never fun, regardless of how much you hate your job. But sometimes, you find the silver lining. You may end up finding a job that you like. You could make new friends, gain new skills, and have new opportunities. The second thing is that nothing lasts forever. Do what you must do to provide for your family. This is not the time to be too proud for certain jobs.
Any job that is honest is a good job. Forget your degree and your last paycheck for a moment. Do what is right for your family. Your first option should not be the emergency fund. But if there is nothing else to do, feel free. It is meant for situations like these. But cut your expenses first so the funds will last. Only take what you need. You are much tougher than your situation.
Do not let anything overwhelm you. Apply the practical steps outlined above and you will be fine. Things will get better. Life is full of uncertainties. An emergency fund gives you some form of security. With one in place, you can always relax knowing that you are sorted, should an emergency arise. Having an emergency fund is one thing; knowing when to use it is another. How do you know if the emergency is legit? Is there something you should do first before dipping into the emergency fund? If you are wondering why or when to use your emergency fund, let the following questions guide you.
Is It Unexpected? Things like biannual insurance payments do not count as an emergency. You knew they were coming, and you had time to budget ahead. They should never be a reason for you to withdraw from an emergency fund. So, what is the difference between expected and unexpected? Glad you asked. Unexpected – Emergency medical expense – Car accident repair – Natural damage to your home – Hours/pay cut – and Job loss.
Expected – Routine doctor visits – Basic car and home maintenance – Back-to-school preparation – and Holidays. A job loss is usually the main reason why experts recommend 3 to 6 months’ worth of living expenses. Your family will not go hungry as you try to find something else. If the situation is completely unexpected, dipping into the emergency fund may be okay. Is It Necessary? Everyone seems to know that a want is different from a need. But the line between can get blurry at times. For instance, you should take care of yourself, but you do not really need a weekend getaway. It is not emergency fund worthy.
Take a walk or read a book. Check out other examples. Needs – Loss of transportation – Higher-than-expected tax bill – Family crisis requiring unexpected travel – Wants – Car upgrade – Latest technology gadget – and Last-minute vacation. If your vehicle becomes unusable, you can buy another one using the emergency fund. Look for something affordable and reliable. But if you just want to upgrade to something fancier, do not withdraw from the emergency fund. Is It Urgent?
Do you have a friend or coworker who always wants everything right now? Isn’t it exhausting? If you always get what you want when you want it, your emergency fund will not last. Instead of getting something nice as soon as you see it, try patience.
Check out these examples. Maybe Urgent – Sudden move out of state – Broken AC during summer – Not Urgent – Sale at your favorite store – Great deal for something you have not budgeted for. The emergency fund is meant to provide security over the long-term. It is not there for instant gratification. Avoid using it anytime something comes up. However, feel free when you do not have a choice.
But ask yourself these three questions first. If it is a real emergency, do not hesitate to use the money. It took a lot of effort and discipline for you to save it. So, let it save you when you need it. If you are doubting yourself, talk to your accountability partner. They will offer you confidence to go ahead with your decision.