7 Ways to Manage Finances Through Unemployment

04/21/2016 03:50 pm ET Updated Dec 06, 2017


Sometimes I get questions that I just have to share with you. My answers will benefit others because so many people face the same situation.  I was asked how a mom who is unemployed can manage her finances. Here are my answers, 7 Ways to Manage Finances Through Unemployment, in interview style format.

1. If you lose your job abruptly, what's the first thing you should do in regard to your finances and debts?
Review your expenses and cut/reduce costs beyond the basic necessities. Next contact your creditors and tell them the situation and request a modification or reduction in payments. If it was a layoff go file for unemployment immediately.

2. If you've got good credit and want to keep that score high, how can you manage to pay the bills on time if you don't have any money coming in?
Contact the creditor and make arrangements to reduce the payments, delay the payments for a couple of months, or stop using the cards until you are back on your feet.

3. What type of help can a personal banker offer someone who is unemployed and needs to reduce their monthly expenses?
They can request help with creating a budget from the banker. They can also request a reduction in their personal loan interest rates or that their payment be tacked on to the end of the payment thereby giving them a buffer for a few months.

4. If you have a retirement account, is it wise to dip into it at this time? If so, what's the best way to go about it?
Getting money out of your retirement account is not conventionally recommended unless it is in case of an emergency. If you must take money out you can take out a portion and roll the rest over into an IRA account. All the money doesn't have to be used unless the situation is dire but if at all possible leave 10-20% of it in an IRA account.

5. What's the best thing to do in a scenario in which you've been unemployed for awhile, lived off your savings, and now those savings are dwindlng?
Find a part-time position ASAP, sell what you can, and/or start a service business like cleaning, virtual assistance, painting, etc.

6. Are there any tactics people can use, such as negotiating with credit cards, the IRS (if they still owe taxes) and their mortgage company in times of unemployment? Is there such a thing as deferring payment on certain bills until you get back on your feet?
The best tactic is to be honest and direct about the situation. The reality is everyone, even the IRS knows someone who has been affected by unemployment. Tell the truth and tell them you are willing to work out a plan during this phase of your life. Payment deferment will vary depending on the company. The reality is most companies just want to get paid so something is better than nothing.

7. What is the best way to reduce monthly expenses?
Reduce monthly expenses by eliminating non-critical expenses. This may include cable, subscription services, daily coffee runs, shopping sprees, etc. Stop using the credit cards you have and contact the creditor to amend the payment plan. Do your own hair instead of visiting the beauty salon/barber, make holiday gifts and cards, create and stick with a shopping list. Buy value items instead of brand name. Compare prices and make it a game.

The biggest thing to remember is the situation is temporary. It will pass and you will be employed again.