Job Loss & Money Stress - a Cocktail for Desaster

When someone is about to be laid off, made redundant or simply fired, then there are usually warning signs. However, some people are so caught up in their own concerns or delusions that when the axe falls, they are totally shocked and, more importantly, often financially unprepared. I have 10 tips to prepare your wallet for bad news and how to get through it with smart money management.

There are many reasons for a potential job loss but very few insights and tips about how to deal with the financial stress and required money management. I had some time this week and decided to select and share my top 10 money management tips. These have, in part, been collected from my clients during discussions and interview sessions associated with my on-line resume and job seeking services.

Check them out and use these tips to save money if you find yourself suddenly out of work. Take a breather when the panic sets in and ensure to draft a plan so you can steer clear of financial stress. This will, in turn, help you to stay focused on your job search.

If your financial ship is sinking, you need to plug the holes and also toss some cargo overboard. It will take sacrifice and immediate action, but there are plenty of ways to save money when you are unemployed.

Tip No. 1 Delay major purchases and stop spending where you can

If you devoted several years to a company, chances are usually good that you received a severance or redundancy package. In addition, you may qualify for unemployment benefits in Australia. In the first few weeks after being separated from your job, your bank balance may be larger than normal, but don’t spend your severance on frivolous items. Always think in the long-term and avoid short-term gratification.

If you have any inkling or a gut feeling that you may lose your job, or even if the situation in your company or your industry is precarious, now is the time to delay major unnecessary purchases. When stores start offering options such as payment plans and lay-away (remember lay-away?), or any of the other silly 48 months ‘no interest pay’ offers, then run (don’t walk) in the opposite direction. Recently, as an example, a well know ‘Harvey retailer’ re-started an oft-used campaign with an offer to delay interest payments for four years. Resist these siren calls of to ‘buy now’. Despite the fact that your purchases will aid the economy, your far-more-important priority is to prepare for pending unemployment. If you have it, don’t spend it. That should be your mantra until you have signed up for a new job. In fact, it would be better to wait until you have passed the probation period because of the many potential pitfalls.

Tip No. 2 Explore assistance programs

While you may be reluctant to consider or accept financial assistance, pride can make unemployment even more difficult than it already is.

I have a simple view on this. If you have contributed over many years to the social welfare system by paying your taxes, then don’t ignore the available assistance programs. Now is not the right time for false vanities or pride. Your family and your wallet will thank you. Explore options for low-income customers at your local service providers such as your energy company or phone service and start to read up on assistance programs. Many of these services don’t require you to queue for long humiliating benefit lines and instead offer online or phone services. Depending on your income, you might qualify for a reduced rate.

Tip No. 3 Live on one salary and stop using two vehicles

You may think that I’m a bit negative here, but our economy can’t continue to sustain the healthy pace of the recent years. Jacob Greber from The Australian Financial review regularly alerts the public and recently wrote again about increased workloads for Australian employees and the rising unemployment rates. For a family in which two or more members are employed, consider trying to live on one salary to build savings, eliminate debt and prepare for the potential consequences of unemployment.

Two vehicles is the standard for many families comprised of two workers. Since you will have a lot more time on your hands, take one vehicle off of your fuel bill and insurance policies. I know, it takes a new mindset and you might have to drive your partner to work, dust off your bicycle, take our not-so-perfect public transportation, or simply walk (gasp) around town. But, the reward is double – for your wallet and your health. In addition, you may discover that you are easily able to manage with just one vehicle most of the time. Ultimately, these two basic tips can shave significant dollars off your monthly expenses.

Tip No. 4 Cut subscription services

Regular monthly bills can be a burden during a time of unemployment. High end mobile phone, internet and cable TV plans are all non-essentials and should be considered for a place on the chopping block. Can you really justify what you pay for your mobile? Can you swap from the ‘all inclusive’ to the prepaid or reduced capped plan? Do you need redundant services like a smart phone with expensive internet access plus a land line and internet service at your home? Is cable television necessary when you can stream many of your favourite shows on websites like Sony or Apple.TV for free? Could you do with less?

Take a good look and chances are you eventually could save some serious dollars per month by getting rid of unnecessary or superfluous subscription services.

Tip No. 5 Park or cancel the luxuries

It amazes me when I discover how many luxuries some clients maintain while unemployed. Consider this and ask yourself if you can do without recurring “luxuries”, many that simply save you time and effort. Do you need the Platinum Gym Membership or can you do with a discounted or less expensive gym membership for half the price? Do you need all those subscription and membership packages for iTunes, various mobile apps and gadget subscriptions or can you cull or downgrade and eventually even park some of them for a few months? Do you really need the luxury health insurance plan or should you downsize for a few months? The list could go on and on and I am sure you can find a few items. So start mowing your own lawn, washing your car, washing and ironing your shirts and changing your own oil. When you heed these tips to save money, you’ll see the difference it makes to your wallet.

Tip No. 6 Check your liquidity, tally your expenses and consolidate credit cards

Liquid assets are those that you can get your hands on immediately such as checking and savings accounts, and brokerage accounts. Add all the balances together, which should paint an accurate picture of your liquidity.

Then, tally your household expenses. The most necessary household expenses tend to be food, rent or mortgage payments, utilities, school fees and medical insurance. Slash the unnecessary items from the household budget (e.g. new clothes, dinners out) and figure out how long you can survive using just your liquid assets.

Next, look at consolidating your credit cards. Review all your credit card statements, focusing on the outstanding balances and current interest rates. In some situations, you may be able to take advantage of balance transfer offers, but always read the fine print on these kinds of deals. Control the urge to purchase using a credit card and avoid using the credit card unless it is unavoidable. You’d be surprised how few items are actually essential – maybe even leave the card out of your wallet. The bills always come due and the interest adds up to more than you ever imagined. Credit is the main factor in families living too close to the edge in the event of unexpected unemployment. Clancy Yeates at The Age sounded the alarm in a recent debt dilemma article about rising credit card defaults along with job losses in Australia and New Zealand.

Tip No. 7 Reduce or avoid eating out

If you have a well established routine that involves eating out once or twice a week (or more), it may be difficult to break the habit. Try to start saving by swapping to lower cost venues or re-ignite your home cooking. And, if you’re lousy at that, at least swap to lower cost take-aways. So, instead of eating out, eat at home and ‘tip’ yourself. You could easily save hundreds a month by abstaining from swanky restaurants.

If you can’t give it up all together, the next time you go, split a meal with your spouse or friend – and don’t order pricey drinks. You’ll save some meaningful money. If you are into it, use dining coupons or one of the many new Groupon deals that allow you to buy one meal and you get another meal or item for free or for half-off.

Tip No. 8 Become a smarter shopper and consumer

Pass the isle with the chic items and buy generic items versus brand name items. This is one area you have plenty of opportunity to save money. When you buy groceries, household items and prescription drugs you can often opt to buy generic rather than paying more for the fancy packaging and well-known brand names.

Online shopping – I used to shy away from buying some things I need online. Lately, after learning all these useful insights I have started to look for special items that I can get for less than buying from a store myself. I recently purchased a new helmet for my motorbike for half the price.

Don’t shop on an empty stomach – I’m sure you’ve heard it before but don’t laugh, I’m serious. I learned this from one of my clients who had some weight loss tips for me and it turned out to be good for my waistline and my wallet. Make a grocery list of items you need before you head out to your favourite grocery store. This will help keep you from buying things you don’t need.

Find and shop for simple items at your local dollar stores – Your local dollar store is a good place to find good deals for needs like paper goods, wrappers, cleaning solutions, bin liners and other common gear. You may think this is all a bit extreme, but I’ve noticed more of these dollar saver shops seemingly popping up every month. So, they must be doing it right. Whilst not technically a dollar shop and I am not advertising for them in my blog, but there is a certain German retailer who is giving Coles & Woolies a run for their money. I am not talking about Sausages and Apple Strudel J.

Tip No. 9 Generate some cash

If you have a talent , hobby or passion, see if you can turn it into regular or one off cash during your unemployment period. There are many freelancer portals that need local talent such as WhoCando. If you’re good with tools and if you need some instant cash try Airtasker and if you are a bit of a MacGyver type check out ServiceSeeking or Rocketshift if you feel like earning a bit of extra cash in a cool bar, restaurant or café.

There are also a number of unique job portals which focus on Australian and New Zealand based nerds or geeks or design savvy desk tigers. I have to admit that I’m a bit of a nerd myself and often get speaking assignments via one of these portals. These sites enable you to work from home and earn some extra cash if you are good with IT or other professional services. You also don’t have to worry about global competition.

If none of the above appeals to you think of other alternatives. Use your desk time and all your presentation skills and try to sell something with a unique sales pitch and do the marketing with the power of your social network.

If you have a creative talent and you want to sell your artwork or handy craft then look at marketing this. Check this out for an example and crank up the volume – you might like it.

There are a number of sites that can help you get organised, such as Crushpath and Buyandsell or Trademe if you are in New Zealand.

I could go on forever – the list is long. Ask your friends, use your social network and get creative. It’s not as bad as you think if you use your talents instead of passively worrying about your finances. It is not a silver bullet and it will not replace your previous earnings, but it helps and you may also feel better about yourself at the end of a day.

Tip No. 10 Quit smoking

This is my personal favorite since I am a bit of an advocate for healthy living. Like gasoline prices, the cost of a pack of cigarettes keeps going up and up. During your job search, consider quitting the smokes for good. Your budget will be a lot healthier, as will your lungs.

These 10 tips are largely courtesy of some of my clients who realized the underlying issue for their money troubles was not just the loss of income but also their inability to live within their new financial situation.

I also learned from listening to many of these stories, that money problems are often math problems wrapped in emotion and procrastination. So, avoid being caught out. Instead, prepare and face the beast head on.

Unemployment is tough and the sudden change is difficult for many people. Additionally, most people do not like change; they want things to remain as they are. However, wishing and reality are not the same thing. So, don’t turn into a victim of the situation. Take control of your situation and seek help if you are overwhelmed with the new situation so you can focus on your job hunting.

If you have other useful insights and tips, feel free to share them in the comments area or write me an email, and, if you are job hunting or career changing remember to hunt wisely.

Uli