How to Budget for Unemployment

This is so simple that it should not need to be said, but...

If you should lose your job, it behooves you to be ridiculously cautious about how you spend the little money that you have. Oddly enough, a lot of jobless folks fail to understand this until it is too late. They end up homeless or maybe just broke -- or at least worrying about becoming so. It can't be emphasized strongly enough: If you are without a job, plan and stick to a budget from the outset!

It matters not if the maximum unemployment insurance payment in your state is very high. It really doesn't matter if you got a sweet severance package on top of unemployment insurance. Unless your spouse is wealthy and/or very patient, you need to protect yourself financially. The best (possibly the only) way to do that is to stick to a budget as if your life depended on it.

How do you accomplish a budget? It boils down to these four steps:

1. Plan. Sit down with your spouse (or if you don't have a spouse, sit down by yourself or with a friend) and figure out how much is currently going out and how much you can contribute based on your unemployment insurance, part-time income, picking cans out of the garbage or whatever you do for money.Draw up a detailed accounting of what is coming in and going out.
2. Figure out where you can cut, and cut. Cut the non-obvious stuff. Cut where it hurts. Cut cable television. Cut out meat and buy huge bags of rice and beans. Cut, cut, cut until you have your monthly outflow down to the bare minimum.
3. Negotiate with your creditors. One of the few upshots to unemployment is that it gives you a fair amount of negotiating leverage in reducing your debt. Your creditors do not want you to go bankrupt. You might find that they are willing to work with you or your representative.
4. Execute and stick to it. This is the hardest part. Anyone can make a plan. Anyone can find hundreds or thousands of dollars that they don't need to spend each month. The trick is to actually follow through. Pare your lifestyle to the bone and get used to living that way. Even when you find a job, you will be in much better financial shape for becoming accustomed to frugal living!

It is as simple as that. Remember that sacrifices will be necessary. Once you resign yourself to the idea that you will not be able to have all the things and comforts of a person with a job, your unemployment budgeting will become much easier.

By the way, to make things even better, you should learn more about unemployment and debt.

Be sure to check your credit reports and scores too.