It can become difficult budgeting money if you are unemployed. (After all it is difficult to budgeting money if you don’t have any coming in). Being unemployed can be one of the worst and most stressful experiences of your life. It ranks right up there with divorce and death of a loved one. In today’s uncertain times, it’s still going on in many parts of the country.
The national average of unemployment is over 9.5% and some states are in the 15% range. In cities like Detroit it can be as high as 30%. Many people don’t know where to turn. Unemployment benefits are a fraction of the former income and in some households both income earners have been let go. Sounds pretty bleak, and it is if you’re one of the unemployed.
I’ve been there and know the pain. But don’t sit and think too long. There are many steps you can take to improve your situation and come out on top. Quickly embark upon a plan that will get you back on your feet. Easier said than done, but hey, you went to work every day to earn a paycheck, now you need to go to work every day to find work, a new career, or start a business. Based on my personal experience and that of many friends and people I’ve coached, here are some basic steps you can take starting right now.
1) Leave your 401k alone!
I put this up as #1 because many people are using their long-term 401k’s as a short term safety net. They figure that it will get them through the rough time. There are several problems in doing this. Firstly, most people simply don’t have enough saved in their 401k’s to last them very long. The average 401k savings is about $45,000, or less than 1-yr of the average income. When you consider taxes and penalties taken out, a 401k cash out may not last you long enough.
Even if you have enough in your 401k, it’s still a bad idea. Common sense economics is that you don’t use long term money to fund short-term expenses. This is solid economic advice. Keep your 401k intact unless it is an absolute last resort. You should follow all the remaining advice before using any of your 401k funds.
Another 401k myth is that you cannot leave it with your employer’s plan. That’s not true. You can leave your 401k funds with employer. The only reason to do a Direct Rollover to an IRA is if you were not happy with your employer’s plan. But even still, there are many other things you can work on other than researching IRA’s at this point. Focus on the next 7 things to get your life and income back on track…
2) Review Your Income and Expenses
It’s time to get serious about managing your money, on paper. Write down everything: your income, all your debt and expenses. You can use pencil and paper, Quicken, your computer spreadsheet system, or a variety of inexpensive budgeting tools that are on the market.
Then keep track of all your daily discretionary spending every day by writing down each expense on a piece of paper as that expense occurs (so you don’t forget later). Every coffee, candy bar, or tank of gas needs to be recorded on this piece of paper, even if you use a debit or credit card. Each day total it up and after a week, compare your actual daily expenses. You may be surprised at how off you were. Many of these expenses are candidates for being cut.
3) Cut Every Expense Possible
It’s time to face reality and take action. Cut out all discretionary spending. From your list above, start eliminating and don’t look back. It’s a New Day and you’re on a New Program.
Once you’ve cut all discretionary spending, start whittling down other expenses like cell phone plans, cable TV plans, car insurance. Everything is negotiable. Call the companies and negotiate. If they won’t negotiate with you, ask for their manager. You could see 20-50% reduction in some of these plans by reducing the services or negotiating better pricing.
4) Sell or Downsize what You Don’t Need
This is a tough one because you may be parting with stuff you thought you would always hold onto. I’m an Audio/Visual buff and had 2 home theater systems at my house. Guess what? Sold. I did a lot of household projects and collected a lot of tools that I didn’t use anymore. Guess what? Those got sold too.
By selling stuff you don’t need you’re accomplishing two things. First, you are generating extra cash that can be used to buy things you do need like food! Secondly, you’re simplifying your life and should a move be in your future, you’re starting the move process early by cleaning up and clearing out stuff.
5) Join Career Ministries and other Job Networking Sites
Many people I know are finding success using LinkedIn to find new employment. Many companies are searching the profiles and resumes posted. Make sure you complete your profile with as much detail as you can, including what your new job objectives are. The more specific you are, especially with keywords, the more likely prospective employers can find you when they conduct their keyword search.
Another successful organization is Career Ministries. You can find them on LinkedIn also. They meet weekly at local churches and provide an abundant amount of free resources such as HR speakers, resume experts, and job networking experts. On many occasions there are prospective employers network as well. Be sure to bring several unfolded copies of your resume and plenty of business cards.
If you’re interested in starting your own business, you must check out TechTown in Detroit. Sponsored and funded by the Kaufman Foundation (largest entrepreneurship organization in the U.S.), the SBA, and Wayne State University, it is one of the hottest entrepreneur incubators in the country. They host a “First Friday” event every first Friday of the month which is a great networking event. They also have numerous new business start up programs and education tracks.
6) Evaluate Your Passions
What motivates you? This is a good time to ask some serious questions about what you liked in your previous job, what you didn’t like. What hobbies do you have that can be turned into a business. Do some soul searching, get some volunteer time in, and rebuild your spiritual foundation. Doing so may bring you some ideas you had never thought of.
7) Make Some Positive Changes!
Take a hard look at the above and start making a list of some things you want to do differently, bad habits you want to eliminate, or new ventures to embark upon. Now is the time to explore some new options and reinvent yourself. There’s a whole new world out there awaiting for the new you to embark upon it. Harness the negative consequences of losing your job and turn them into positive changes.
8) Re-Evaluate Your Budget Every Month
As you use up your emergency savings, severance or unemployment winds down, it’s more important than ever to have a grasp your spending, budget, and potential new income streams. Find a reputable budgeting money program to help you get your arms around your new financial situation. There are numerous programs and budgeting coaches to choose from. Select one that best aligns with your situation and your own personal values.
Whatever program you choose, review it regularly, even after you start earning a paycheck again. Learn how to set goals, put them in writing and review with your spouse or a significant other on a monthly basis. Start to teach your kids about the value of money at an early age. Money is a family affair and all are affected and need to be knowledgeable!