The key to living on an unemployment budget is to be the world's greatest cheapskate. Don't make any purchases, from the smallest can of corn to a new pair of shoes, without asking yourself, "Is there any way I can get by without this?" If the answer is yes, don't buy it. If you're not used to a Spartan life style, this will be painful. Don't put off the pain until later; don't try to maintain a comfortable life style by eating through your savings or wasting any of your severance pay. You may be able to delay painful decisions, but that will make those decisions all the more difficult when you actually do have to face them.
If you received unused vacation pay from your employer in a lump-sum payment, don't touch any of it unless you have no other choice. If you do find another job quickly, unused vacation or severance pay can become a great bonus for your family, allowing you to reward them for surviving a difficult ordeal.
Getting A Loan To Help You Through
Immediately after you are let go, if you are concerned about being able to weather an extended period of unemployment, you might want to apply for a loan to give you needed cash. Because any loan you assume will add to your debt and create another payment, you should apply for one only if you think you won't be able to survive at least nine months by using the tactics outlined in this article.
Applying for a loan when you don't have a job can be a tricky proposition, however. If you have a reasonable amount of equity in your home, your first choice should be to apply for a second mortgage loan or home equity loan. These loans will give you the best interest rate possible. If you have determined that you need a loan, call your former employer before you apply.
The bank will ask him or her to complete a form, verifying the information you give them in your application. If you are covered under a severance agreement, your employer can technically state that you are still on his or her payroll and that your salary has not changed. You should not ask your employer to falsify your application, nor should he or she need to as long as you are still on the payroll under your severance agreement.
Rather than apply for a loan, you can ask to have your limit increased on one credit card. You should avoid using credit cards except as a last resort. If you already have high balances on more than one card, you probably shouldn't try to increase your limit.
The interest you are already paying each month offsets any cash flow benefits you might obtain from increasing your limit. However, if your cards are paid off, they can provide a source of cash with postponable payments.
Borrowing Money from Friends or Family
Just the thought of going to mom or dad to ask for money to see you through can be a painful prospect. In general, if you can put together an unemployment budget that doesn't involve any kind of borrowing, you'll be in much better shape. Saddling yourself with a large amount of debt will put a great deal of pressure on you when you do find another job.
If you do have to borrow money, borrow it from a bank or other lending institution if possible before asking friends or family. At last resort, however, you may have to ask someone close to you to help you through a difficult time. If you ask or they offer, be sure you put everything in writing. It may sound odd, but the best way to preserve a good friendship or family relationship is to keep money out of it.
If your parents offer you money to help you through and you decide to accept their offer, be firm in telling them you plan to pay it back, then write them a letter telling them how you will pay it back. Your payment plan should start as soon as you find another job and should include regular monthly payments as if you owed money to any financial institution. Don't let them talk you out of it, and don't assume you'll pay them back "when you can." More family rifts have been created over money than anyone cares to count.
