7 Ways to Manage Your Finances During Unemployment

How To Manage Finances While Unemployed
GUIDE
Erica Sandberg
By: Erica Sandberg
Updated: June 11, 2020
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When you lose your job and the income that comes with it, the stress of meeting expenses can be intense. Your anxiety may escalate further when there isn’t a specific end in sight.

How can you manage your finances under such uncertain circumstances?

Thankfully, it’s possible. Take a deep breath, strategize, and get ready for action. Do so, and you’ll feel far more comfortable about the present and the future.

1. File for Unemployment Insurance

If you’re not already receiving unemployment insurance, apply for it. Each state administers its own unemployment insurance program, though it follows a standard established by federal law.

According to the U.S. Department of Labor, you probably qualify for unemployment insurance benefits if you have lost your job through no fault of your own, and you must meet specific work and wage requirements — essentially, that you worked during a particular period, called a base period.

It generally takes two to three weeks after you file your claim to receive your first benefit check, so the sooner you submit your application, the faster money will be flowing in. Be aware that unemployment insurance is not designed to replace your entire income. Use the FileUnemployment.org calculator to understand how much you likely will receive in benefits.

2. Determine a Baseline Budget

One of the most powerful things you can do right now is to sit down and create a temporary budget. After determining the amount of money you require to keep your household afloat, you can use that figure as a baseline.

As a general rule, the most crucial expenses are mortgage or rent, utilities, groceries, transportation, and healthcare (such as insurance, prescriptions, and doctor and dentist visits). List precisely what these monthly expenses are and identify any monthly income you expect to receive.

Photo of a woman making a budget

Your baseline budget should include all of your necessary monthly expenses, such as your mortgage or rent payment, utilities, food, and healthcare costs.

If you have enough money to cover these necessities, you and your family will be safe from harm. Your aim, therefore, is to at least meet that number.

For example, you may find that your normal monthly budget is $3,000, but by trimming excess spending, you can reasonably get expenses down to $2,000. That makes managing your monthly expenses easier for a while with the unemployment insurance benefits as well as other methods to bring money in.

3. Get the Family Involved

It’s extremely difficult for one person to do all the heavy financial lifting. If you have a partner or children, get their buy in to buy less.

Hold a family meeting and explain the situation. You’ll need not just their compliance and ideas, but their excitement. Adopt a “we will get through this together” attitude.

Older children, especially, should be brought into the fold and participate in identifying ways to keep spending low. They may also contribute any income from part-time jobs or gig work like babysitting or dog walking to the general household budget — at least temporarily.

4. Save, Even When Money is Tight

Not only do you want to cover your current expenses, but you’ll also want to set a little cash aside for unforeseen expenses.

Even when cash is tight, decide on a dollar amount you can part with and have it automatically deposited into a savings account. Break it up into amounts you won’t miss, such as $15 every week.

Photo of a savings jar

Saving, even if it’s as little as $15 per paycheck, can help you avoid future debt.

In six months’ time, you will have saved up to $360, which may be enough to pay for a medical bill or a car repair, without coming up short or needing to borrow with a credit card.

Furthermore, the very act of saving money puts you in a psychological position of power when you may be feeling your weakest.

5. Reduce (Painlessly)

With a few phone calls and applications, you may be able to lower some of your essential expenses. For example, refinancing a home or car loan can help you pay less every month (though you’d have to weigh the downsides, such as extending the loan).

Also contact your car insurance, cable, phone, and power companies to find out if there are programs for people in financial need.

Paying a federal student loan? Apply for a deferment or forbearance so you can take this financial obligation off the table for a while.

Set a day aside to contact all the companies you pay on a regular basis. Call each and ask how to get the costs reduced to the bare minimum without interrupting the service you’re accustomed to. Once you’ve arranged a lower payment, the only thing that will change is having more money in your budget.

Another pain-free way to generate cash is to sell articles of value you own but can do without.  You may have valuable things around your home or yard that you can part with. Sell them on websites such as Facebook Marketplace and use the proceeds to pay for bills or add to your savings.

6. Contact Your Creditors

In the event that no money is left over after paying your essential expenses, contact your creditors immediately. If you don’t pay as agreed, you’ll be hit with a late fee.

After 30 days of nonpayment, your creditors will notify the consumer credit bureaus that the account is delinquent and your credit history will be damaged. This will cause your scores to plummet and make it hard to be approved for future borrowing.

Photo of a woman on the phone

Call your creditors and request a hardship accommodation if you’re unable to meet your payment obligations.

Credit card companies and other lenders want to hear from you when times get tough so they can help. You may be able to negotiate a hardship plan in which payments are suspended for a certain number of months so you can preserve your credit in the process.

However, these plans will not come to you. So if you need a break, get on the phone immediately and ask.

7. Be Prudent with Credit

Finally, be particularly prudent when using credit while you’re unemployed. If you start charging the things you can’t afford, your debt will quickly escalate.

Eventually, you will reach the end of your credit line, and making even the minimum payments by the due date will be a struggle. Then, when your situation improves and your income returns to normal, you’ll be deep in the hole, and you will have to deal with credit damage.

You must think ahead. Keep your future in mind, and do your best to stick to your budget.