Kimberly Palmer, Neldwallet
A financially stressed Reddit user recently sought advice. As a major family member, how can you keep up with mortgages and other expenses once you’re no longer resigned, including two children?
Reddit users provided many useful ideas. Applying for unemployment, looking for other forms of state support, and finding new jobs was one of the most popular suggestions, even if it wasn’t perfect.
When we asked financial experts how someone could survive a period of unemployment, they reflected many of those same tips. They also highlighted the importance of budgeting, even before unemployment occurred.
Here’s their strategy:
Reduce everything except essential costs
“We’ll focus on your essentials and reduce that budget to bare bones as much as possible,” says Daniel Bird Thompson, financial advisor at TPS finance in Washington, DC.
Thompson says he uses an online budgeting tool or budgeting app. This will help you understand the costs you need and identify where you can freeze your immediate spending.
“What can you cut back without completely blowing your lifestyle away?” asks Lori Gross, financial advisor at the Outlook Financial Center in Troy, Ohio.
For example, if you have multiple premium streaming subscriptions, she suggests cutting everything except one basic subscription.
Rely on community resources
Local communities typically provide resources to people in need, including food banks, crisis relief services and low-income assistance programs.
She encourages people who struggle to pay for essentials to look into these types of local resources. Website 211.org can be a valuable resource for finding support nearby.
Take advantage of the hard work program
Thompson says that mortgages, phone and utility companies offer hard work programs that allow customers to temporarily suspend payments when they are experiencing short-term financial challenges such as unemployment.
“Usually, every provider has a plan,” Thompson says. She suggests calling, explaining your situation and asking about options.
Loan providers may also offer hard work programs, but Thompson suggests that you wait a month first to see if you actually need to use it. Ultimately, even if payments are temporarily suspended, the debt continues to rise.
“If you can afford to stick to your plan, you’ll need to keep paying, but if you can’t, I’ll pull back right away,” she suggests.
If you are forced to make that difficult choice, essentials like food and housing should be given priority.
Earn income wherever possible
“There’s no one to do the bus table, to be a hostess or to deliver food,” Thompson says.
She suggests that she earn money before her next full-time position and assume this kind of part-time role to close the gap.
“It’s putting cash in your pocket, so you’re not going to drain your savings completely,” she adds.
If you earn extra income, make sure to keep a careful record of both your income and expenses, Gross says. When you submit your taxes, it’s easier to make sure you’re paying the correct amount.
At the same time, LinkedIn and other Job-Search websites show you that you can use for work, Gross suggests. That way, recruiters can find you and reach out to them if they have an opening.
“Even outside of normal parameters, they’re open to options,” she suggests.
For example, you’ll probably find a job in an industry you worked for years, even if it doesn’t match your latest work experience.
If possible, prioritize emergency savings
Once he finds a new job, Thompson says it’s time to begin restructuring emergency savings. In fact, periods of unemployment may encourage you to strengthen your savings for the next time.
Ideally, everyone should aim to secure three to six months’ worth of living in a high-yield savings account. If that number is too difficult, saving a small amount can also be helpful.
“When it comes to unexpected unemployment, savings are the front line of defense,” Thompson says. “Even if you only save $20 a month, make it a habit and then build it from there.”
Reddit is an online forum where users share their thoughts in “threads” on a variety of topics. Popular sites contain a lot of discussion about financial subjects such as budgeting and financial difficulties, so I sifted through the Reddit forum to get a pulse check on how users feel about their unemployment survival. People post anonymously, so they cannot check their individual experiences or circumstances.
Kimberly Palmer writes for Nald Wallet. Email: kpalmer@nerdwallet.com. Twitter: @kimberlypalmer.
