When your family loses its only income, or a significant part of it, you can feel as though it’s the end of the world. Even in families with significant assets, the sudden loss of income creates serious worries, or worse still, a real sense of panic.
While you can’t change the fact that your income has stopped, you can minimize the impact of the loss by making a conscious decision to actively manage your new financial reality. The sooner you assume a proactive stance, the sooner you’ll be able to make sound decisions, financial and otherwise, to help you regain control over your destiny.
Here are suggestions to help you better manage and control your finances while you are unemployed:
Begin by eliminating those “nice to haves” but “definitely not necessary” expenses such as frequent meals out or new clothes each season. Then, examine ways to spend less by implementing some clever cost cutting measures.
Compare Health Insurance Plans: Don't assume your company provided COBRA plan is neccessarily your best option. At ehealthinsurance.com you can learn more about COBRA and compare COBRA premium payments for both individual and family plans from multiple carriers.
Shop the sales: During tough economic times, retailers get fairly aggressive at running special sales and promotions. Take advantage of combining sales with coupons and other special discount services.
Use credit cards wisely: If you can’t bring yourself to eliminate or reduce your dependency on credit cards, at least manage your cards more efficiently. If you've already got credit card debt, or you think you soon will, find a new card with a lower interest rate and transfer your outstanding balances immediately.
Reduce use of services: Think of ways to creatively reduce your consumption of services. If your child takes weekly piano lessons, consider switching to every other week instead. If you normally bring the car in for a wash each week, consider doing it once a month instead. These small changes add up over time.
Reduce bank fees: Banks are notorious for tacking on extra fees for services like checking accounts and ATM privileges. Shop around to see if you’ve got the best deal.
Assess your phone plans: Now is the time to actually pay attention to all those annoying telemarketers who call trying to get you to switch your long distance service. Odds are good you can lower your calling rate with just a few well-placed inquiries. It’s also a good time to evaluate if you really need to have a "soup to nuts" cell phone plan that include more minutes or special features than you are using. If you want to be able to make long-distance calls for free, including overseas, consider using a service like Skype that you download to your computer.
Shop your car insurance: Assuming you have a good driving record, you might be able to easily reduce your premiums by shopping around.
Lower your grocery bill: Shopping with a list, a full stomach, and coupons can help you significantly reduce your family’s food bill.
Take Advantage of free entertainment: From concerts in the park to movie night at the library, opportunities abound for free or low-cost entertainment options. Check your local papers for listings of options in your neighborhood.
Use the library: The library is one of the best bargains going. Take advantage of the books, free videos and CD’s, and research databases offered by your local library.
In addition to spending less and economizing where possible, here are some ways to keep your financial picture sound on a long-term basis:
Decide which bills to pay first: Pay debts that are secured, such as house or car payments first. Falling behind on your mortgage will lead to late penalties and could cost you your home, so this payment should be first on your list. Don’t let your payment decisions be dictated by which collection agency yells loudest.
Be judicious about cutting household help: Particularly in the arena of childcare, you don’t want to eliminate your support system, only to have to scramble madly to replace them in a few months. If you can’t afford to continue full-time help, speak with friends who might be interested in hiring your sitter or housekeeper on a temporary basis, while you only use them on a part-time basis.
Keep perspective when checking your investments: Given the volatility of the stock market, your portfolio will go through ups and downs. Don’t get in the habit of checking your portfolio on a daily basis – you’ll suffer needless worry and anxiety.
Don't raid your 401(k): It's tempting when you lose a job to withdraw money from your 401(k) or retirement plan. If at all possible, don't do it. Distributions from your qualified retirement plans are subject to income taxes and a 10% penalty. More importantly, the money you take out won't have the chance to grow and help provide for a secure retirement.
Another smart tip? Consider downloading the Layoff Survival Guide today. That is one investment that will more than pay for itself!
