Expenses to cut when you are unemployed
By Stew
No matter how you lose your job, whether your plant closed, your business relocated to another country, or you were laid off, forced to resign or if you were fired directly, being unemployed is a nerve-racking place to be. Hopefully you have an emergency fund in place that can support your budget for at least a few months. It is interesting how the conventional wisdom on emergency funds has changed just in the past few years. In 2005-’06-’07, personal finance advisors often recommended a three month emergency fund. Then it was six months and now, it is prudent to look at having nine or ten month’s budget saved up for the event of job loss. People are taking longer and longer to find work.
Even if you are fortunate enough to have a healthy emergency fund on hand, an unemployed person needs to reduce expenses as much as possible in order to keep the ship right-side up. Here are some suggestions of where you can cut or shave your budget to reduce spending and make that emergency fund last as long as possible:
Cable television
This is a no-brainer. Many of us have the habit of considering cable or satellite television to be a necessary utility. As a sports fan, news junkie and documentary consumer, I sympathize. But if you are unemployed and still subscribing to cable or satellite . . . you have a problem.
Internet
To be honest, I would not cancel internet service if I lost my job. I think it is essential to modern day job hunting and the internet can help you shop for the best deals on the few purchases that you might need to make even while unemployed. At our house, broadband internet more than pays for itself. There are some things that one might do to reduce the cost of internet – request permission to piggy-back on your neighbor’s wifi or use the wireless internet at a restaurant or coffee shop down the street.
Mobile Phone
This is another expense that would be difficult to completely eliminate. I think most of us would sooner get rid of our home phone than our mobile phones. You might want to consider reducing the number of lines in your plan or inviting a friend or family member to join your family plan in order to share and reduce costs. My parents recently transferred their numbers to my wireless phone plan and are saving between $40 and $50 a month.
Energy costs
If it is wintertime, there is not much you have to heat your home, however, you could turn the thermostat down a couple of degrees and maybe go to bed earlier in order to limit energy usage in terms of both heating and electrical power. The summer time provides a greater possibility to reduce energy costs: air conditioning. I know, sounds painful, but we all grew up without air conditioning, even in very humid locales. Our parents and grandparents proved that a lack of air conditioning will not kill anyone. Depending on where you live and the size of your house, turning off the AC might reduce your energy bill anywhere from $50 to $200 a month.
Food
No more out to eat. Ever. Even fast food that seems cheap. Buy groceries, grow vegetables and even consider limiting your food intake. Most of us eat too much anyway and while it is nice to have seconds and thirds, eating fewer calories means that the amount of money spent on your food budget will go down.
Use common sense
If a purchase can be delayed, delay it. If you can walk or ride your bike, do it. If you do not need new clothes or you can get those clothes at a second-hand shop, do not buy them retail. Desperate times call for desperate measures–no luxury is so important that it cannot be put on hold for a bit.
Hopefully, this event will not happen to you and your family. But in case it does, it is always wise to have a plan in mind.
Article by Stew
Photo by byoogle
May 10th, 2010 at 3:40 pm
How very timely! Just got laid off today. Never been laid off before and it was (as must often be the case) completely unexpected.
But all things considered it’s not so bad: we’ve got a good 9 months of emergency fund (and that’s if my wife is also not working so it should last a good bit longer than that), 3 months of severance and 3 months of COBRA. We had just bought a house, but it is modest and we rented out the old house (which is mortgage free) for about the same amount as our new mortgage.
So, all in all, I don’t feel too worried (yet).
Good advice. Not much more that we can cut as we already do most of this.
May 10th, 2010 at 3:46 pm
Yeah, this topic has been on my mind lately as there is a certain level of uncertainty with my job right now.
May 11th, 2010 at 8:38 am
Public libraries always have free internet access even if you have no computer.
Cut internet.
Cut cable.
Go to a prepaid phone if you aren’t tied into a plan.
Sell one of your 2 or 3 cars (even if they are paid off).
May 11th, 2010 at 11:22 am
I’m without a paycheck right now as I build up my new business and it’s definitely an eye opener. Thankfully my husband has a good job and we think we can live off of his salary if we’re careful.
One thing some people don’t consider are their insurance needs when they’re not working. Cobra is crazy expensive (mine was almost $800 a month for me and my son) and I think if people shop around they can find better values on their own. Especially if they negotiate cash prices directly with doctors and leave major medical out of it entirely.
Phil – you have an amazing attitude and it sounds like you’re going to do just fine. :) You obviously prepared ahead of time and were smart – not living beyond your means. My hubby and I are still working on that. :)
May 11th, 2010 at 3:00 pm
I think most people would be better off with an affordable catasphrohic coverage than an 800$ per month coverage (unless of course you had medical issues).
That being said, most of the things Stew mentioned will improve your health ( walk more, eat less).
Review all bills/services you get on a regular basis and decide if you can do yourself. I used to change my own oil, but got lazy. But if I had to, I would do it myself.
Review ALL your insurance coverage – use the time you have now to compare companies and rates.
If you choose to keep your cell phone.internet, call them up and see if there is a better rate ( we should all do this every year). There are often better packages that they won’t offer unless you ask.
May 11th, 2010 at 7:43 pm
PHIL:
I’m so sorry! But I’m proud of your E-Fund (me, too!). My firm has just laid off 5 people, and we’ve been at reduced hours for a year (oh the $$ I’ve lost :c(.
BUT, I was startled at your “3 mos of COBRA” comment. You know you have a right to 18 mos, right ?… And right now, 15 of those months at paying only 35%.
BEST WISHES
May 12th, 2010 at 2:06 am
These are excellent examples. Unfortunately here in the states people don’t ever seem to want to give up the things that put them more in debt. the horrible spending habits of people here in the US is what gets our economy in so much trouble.
May 16th, 2010 at 11:06 am
My company has been in bankruptcy protection for over a year now and is in the final stages of selling off portions of the company and then closing the books one last time. For those of us still there to do the final winding down of the company, our jobs continue but we’re never sure for how long. I suspect I’m fine until early July, but once the Q2 reporting is done I’ll be gone. Because we’re in bankruptcy protection I won’t get any severance, just the 4 weeks of vacation I’ve saved up. Kind of my own DIY severance package. If I’d been laid off before we went into bankruptcy I’d have received severance equal to a year of salary. I stinks to be so valuable I’ve been kept to the bitter end and get screwed on the severance as a result.
So in the meantime I do my job (but not the 60hrs a week I used to give them), I collect my pay and I continue to look for a new position. I hope to find something at least equivalent to move to before I’m laid off. At this point I’m not willing to take something that pays far less than my current job, but if the lay off comes along before I find something, I’ll have to become more flexible.
We currently cover our barebones needs on 55% of our take home pay and since my husband brings in 59% of the money we can continue on indefinitely without my salary. It means however that we stop all retirement savings, extra mortgage payments, travel and anything else nonessential – all the stuff covered by my 41% of our current income. We can’t discontinue retirement savings forever or we’ll never retire but we can certainly stop the contributions for a few months while I find a new job. Living so far below our income as our normal way of life certainly takes the pressure off this situation and allows me to conduct a calm rational job search without the pressure that if I don’t take the first thing I find we’ll lose our house or won’t be able to feed the kids.
May 18th, 2010 at 2:47 pm
Good advice!
I’m with Dan from above– use the library and other “free” resources until you are back on your feet.