Similarly, having someone come in to do your housecleaning is a luxury you cannot afford while you are unemployed. For this family, canceling the housecleaning service saves $125 per month. This family's transportation costs are $250 per month. By being out of work, the unemployed individual automatically spends less on gas, in this case a savings of $30 per month. The second individual currently pays $150 per month in parking, a figure that can be reduced by half if this person carpools or takes public transportation. Overall, this family can cut at least $100 out of its transportation budget monthly while one member of the family is unemployed.
The next category of savings comes from such "nice to have" items as entertainment, gifts, dinner out, lunch out at the office, and other nonessential items. This group offers ample possibility for additional budget savings for this family.
Cutting these items from the budget will be painful: You cannot go out to dinner unless it's for fast food. Entertainment will be reduced to a rented videotape once a week. The family member still working will have to carry his or her lunch to work every day. Painful as they may seem, however, these cuts can have an immediate impact on your family budget, freeing you from money anxieties that may make it difficult for you to concentrate on finding a new job right now.
After the Nonessentials
If you've been keeping track, this family still needs to cut $50 from its monthly budget for the first six months. If you have cut out all the nonessentials and still come up short on your monthly budget, you have two options to consider: You can begin taking money out of savings, or you can negotiate with your creditors for reduced payments on money you owe.
You should try to hang on to savings as long as possible. Always keep as much cash on hand as you possibly can in order to ensure that you have something in reserve in case of emergencies.
At this point, it might be wise to talk to the companies to which you currently owe money. Call your mortgage lender and arrange to meet with them about paying interest only on your loan for a few months. Send a letter to the bank that holds your car loan and ask to work out a reduced payment plan for a few months. Remember, creditors want to avoid legal maneuverings as much as you do. This family's $50 shortfall after removing all nonessentials from the budget can come from negotiations with lenders to which they owe money.
Don't Touch Those Savings
Don't forget, however, that this family will likely lose its $1000 per month unemployment compensation after the first six months. Although many people find employment within six months of losing a job, some do not. Your initial plan should keep your family safe for up to a year, ample time to find another job.
After six months, this family will likely have to begin taking money out of savings. You can see that if the unemployed wage earner is out of work for an entire year, this family will deplete nearly all of its savings, with the exception of its 401K savings. If you get to the point at which you have exhausted all other options and are taking money out of savings, remember to use first those savings that do not have some sort of penalty for withdrawal of funds. Don't touch 401K or IRA funds if you can possibly help it.
It's Not as Hard as It Looks
Remember, there are many creative ways for your family to save money while you are out of work. Setting up a comprehensive budget and getting the whole family involved will immediately reduce your money anxieties and allow you to concentrate on finding a new job.
If you don't have any savings and have more debt, you may have to be more creative in how you cut items from your budget.
