When we are in dire need, being unemployed makes everything all the more challenging. Even worse, regardless of our joblessness, we still have to face and deal with our expenses for basic needs. The good news is you can turn your current financial crisis into just a temporary setback. Whether you’re experiencing layoffs, furloughs, or pay cuts, you’ll still be able to maintain your financial strength despite having no income. Here are five financial survival tips to adapt, manage, and stabilize your financial situation during unemployment.
Essentials Over Nonessentials
With unemployment, now is the time to rein in your spending to a bare minimum. Take stock and get a realistic picture of your spending. As a rule of thumb, you should give more importance to your needs over your wants.
For example, your top priority should be your necessities like food, child care, housing, utilities, transportation, debt, and insurance. Think long and hard before spending on nonessentials like deliveries, online shopping, and digital subscriptions. They are better off cut back since you can still live without them.
Do a triage to figure out which spending to prioritize first. Then, again, make sure to curb non-essential spending. Your ultimate financial goal should be how to get through your lean times financially and you can make a living below your means at the moment.
50/30/20 Rule
After separating your needs from your wants, start crunching numbers. Avoid budgeting tools with arbitrary measures. Instead, with your financial instability in mind due to unemployment, what you need is something that can easily give you a clear big-picture of your financial plan. One good example is the 50/30/20 rule, a very straightforward monthly budgeting concept.
50/30/20 means putting 50% of your monthly after-tax income for your essentials, 30% for nonessentials, and 20% for debt repayment and savings. This budgeting concept is designed to help you easily reach your financial goals, while at the same time, working to pay off or saving up for a rainy day.
Maximize Liquid or Non-Cash Assets
Your liquid assets are the immediate, accessible resources you can turn to in times of unexpected financial hardship. These include your physical bills, e-money, checking, money on checking, savings and money market accounts, and some investments.
Liquid assets can be conveniently converted into cash. What’s more, they don’t fluctuate with market conditions, unlike stocks and index funds. Simply put, you can easily and quickly withdraw funds at any time while retaining their market value and without incurring a financial loss. Also, unlike in your retirement accounts, you won’t have to deal with withdrawal penalties or tax penalties for taking your funds out early.
A three-month expense buffer is typically common for liabilities such as ongoing tuition fees. If you want to guard against a long bout of joblessness, you can keep a six to two-year accounting cushion from your liquid savings. In general, how much you need to cash out entirely depends on your financial obligations and risk tolerance.
Manage Debts Smartly
Ease your financial burdens. Doing so buys you some time to recover financially. If you have extra money stashed, pay off high-interest credit card balances first to avoid around 20% interest payments. Pay off what you can and put your money toward your essentials later on.
Explore ways to pay off your debt during unemployment. Due to the current economic crisis, many lenders are now offering debt repayment options specifically tailored for struggling borrowers, such as forbearance agreements and deferred payments, and even offer up to a $5,000 loan.
There’s the debt consolidation method too. Consolidating means streamlining all your debts by combining them into one debt. The best part is that doing so may allow you to pay 30-50% less compared to your original debts. It’s a good way to slash expenses.
Indulge in the Gig Economy
The modern workforce is becoming more mobile and remote. This environment is very diverse, and it also involves other economic models, such as sharing, barter, and gift economies. It’s safe to say that the sky’s the limit here.
The gig economy includes the typical side hustles like freelancing, independent contractor, project-based, temporary, and part-time. Specifically, it involves jobs for tutoring, writing, graphic designing, caregiving, babysitting, driving for rideshare, delivering services, or renting out rooms. It’s a great place for you to look for opportunities to make your ends meet.
Final Thoughts
Being aware of where you’re financially standing helps you not to overextend yourself. Since you’re strapped for cash now, you want to keep unexpected spending at bay. Overall, budgeting and taking control of your expenses will surely give you peace of mind, while non-cash assets and side hustles offer security.
