If you’ve recently lost your job (like the other 8.5 million people in the last 2 years), I know you’re in a state of semi-shock. All sorts of questions are running through your head and you’re probably wondering about a lot more than your budget. You’re wondering about how you’ll live day to day until you find employment elsewhere. But making adjustments to your spending habits is an important part of the process of finding your next job whether you budget ^[2] with YNAB ^[3] or just a pencil and paper. How?

^[4] If you’re relatively confident in your ability to weather this storm financially, you won’t seem desperate in your interviews. You’ll sleep better, and your relationships will be better because you’ll know your limitations and your budget ^[2] prognosis for the future. You’ll be better able to respond to interview ^[5] questions with ease and confidence because fear won’t be hanging over your head.

Budgeting steps after losing your job

• Understand what income you still have
• Assess your assets
• Know your fixed expenses
• Evaluate your variable expenses
• Accept that desperate times call for desperate measures
• File for unemployment
• Negotiate ^[6] everything
• Initiate calls to your creditors

What income is still coming in?

Before you make any budget ^[2], jobless or not, you need a clear understanding of what money is coming in from ANY source (spousal income, unemployment compensation, interest, dividends, side jobs, etc)/

What other assets are available?

How much do you have in liquid assets and available savings. Do you have a whole life insurance ^[7] policy with cash value? What about your emergency fund ^[8]? If you’re reading this and actually still have a job, get a big, fat, healthy emergency fund ^[8] in place now (check out 17 Sneaky Savings Strategies ^[9]). You’ll never regret having cash in your bank account.

^[10]

Know your fixed expenses

Fixed expenses are items where the payment doesn’t change that much – things like your mortgage ^[11] or rent, food (not dining out), medicines, your student loans, minimum payments on credit cards ^[12], car payments, required insurance, communication bills (cell phone ^[13]), utilities, or child support payments. You need to have these written down.

Evaluate your variable expenses

These are items where your spending can change month to month. They include clothing ^[14], dining out, entertainment, vacations, gifts ^[15] for friends ^[16] or relatives, and those impulsive trips to the mall or to Target.

Desperate times call for desperate measures

If your income and available assets cannot cover your fixed and variable expenses, it’s time to do some cutting. First cut your variable expenses, then begin evaluating your fixed expenses, trying to find ways to reduce them. You may have to pull the kids out of private school. You may need to eliminate your land line and only use your cell phone. You may have to forego that morning coffee stop. Cable TV may be a thing of the past. You may have to bump up your air conditioner to 78 degrees and turn on the fan or bump down your heater to 68 and don a sweater. You may have to jettison that second car, or the camper you haven’t used in 4 years (or was it 5?). You may have to have a yard sale and get rid of the clutter in your garage or attic. You may have to become a coupon clipping maniac.

The bottom line is you have to stretch every single dollar as far as possible.

File for unemployment

It’s disgusting, I know. I had to do it once and I was so embarrassed I left the office without filling out the paperwork and found a job within an hour – digging ditches … literally. But since you’ve paid into the system, it makes perfect sense to get back what you deposited over the years.

Negotiate everything

Your creditors may be willing to negotiate ^[6] your interest rates, but you have to know what to say to get your credit card interest rate lowered ^[17]. Whatever you do, never let on that you’ve lost your job in these negotiations – that comes later.

Initiate calls to your creditors

Don’t make them have to come looking for you. Initiate the call yourself, explaining your situation and the fact that you’re desperately looking for employment and you plan to pay minimum payments, even while unemployed. Your creditors may even have programs to temporarily suspend your payments, but you’ll never know unless you inform them of your situation. Make certain you answer their calls and perform exactly as you promise.

Making a budget is about setting priorities

Your creditors know this – they just want to be a higher priority than anything else. But remember, you’re the one in control. You decide who gets paid and how much. Don’t let a pushy debt collector ^[18] take your food money or your mortgage ^[11] money or your child’s medicine money. Explain where they are on your prioritized list and tell them when and how much you’ll send them. Then follow through.

“When worms are scarce, chickens keep scratching.” ~Bill Lee

Be prepared to scale back – big time. That part is inevitable, but also know that this too shall pass. Get off the couch and get started interviewing. You’re lifestyle may take a hit, but if you don’t give up and keep on scratching, you’ll make it.

About the author

Ron has written 1082 articles on The Wisdom Journal.

The founder and editor of The Wisdom Journal ^[19] in 2007, Ron has worked in banking, distribution, retail, and upper management for companies ranging in size from small startups to multi-billion dollar corporations. He graduated Suma Cum Laude from a top MBA program and currently is a partner in a national building materials company.

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