How Do I Manage My Money Since I've Been Laid Off?

Over the first half of 2022, layoffs have been steadily rising due to the rise in labor costs and slower business growth in the face of the predicted economic recession and skyrocketing inflation rates. Unfortunately, with the increased cost of living and widespread layoffs, figuring out how to save and manage your finances has never been more critical. 

What To Do After You Are Laid Off  

When you've suddenly been let go from your job, the most important thing to realize is that being laid off is not your fault. Between the pandemic-related economic turmoil and companies having to navigate new financial and workforce challenges, there are very few things you can do to prevent yourself from being laid off.  

After receiving your notice of unemployment, it's crucial to stay calm and not panic. Although it can be stressful, panicking will not give you a clear plan on how to deal with your finances. Nevertheless, you should take four crucial steps as you navigate this temporary period of unemployment and limited income. 

1. Assess Your Financial Situation  

Sit down for a couple of hours and closely examine your new financial situation. If you have joint income, take time to review all the details and areas of concern with your partner or spouse. When analyzing your new finances, consider these questions: 

• How much liquid cash do you currently have in your checking and savings account within an emergency fund?
• What payments are coming up that cannot be covered with a credit card?
• What are your current credit card balances? Can you make the minimum payment or more on them?
• Is there a low-interest rate credit card that you can consolidate your others on temporarily? Relying on one lower interest rate card might be wise if you don't have a case to cover everything.

2. Determine How Much Your Spending    

Sit down for a couple of hours and closely examine your new financial situation. If you have joint income, take time to review all the details and areas of concern with your partner or spouse. When analyzing your new finances, consider these questions:  For example, you should look at how much do you spend when you go out to eat? How much are weekly groceries? How much are monthly utilities and insurance costs? After assessing your spending, look for ways to cut back on expenses and costs. Here are some examples that can help cut costs: 

• When eating out, locate inexpensive places that are cheaper than your standard restaurant
• Go to the movies instead of plays, and look for discount admissions tickets
• Switch to a more affordable gym or membership option
• Turn your thermostat down in the winter and up in the summer

3. Avoid Major Purchases  

Avoid major and expensive purchases such as a new car or TV during a layoff. Suppose you already have accumulated credit card debt. In that case, it might be wise to condense your loans into a single monthly payment with lower interest rates. 

4. Create an Updated Budget 

If your new income still covers your expenses, you might only need adjustments to your budget. However, if your expense will not be covered or barely cover the cost, you should start to create a new budget based on your new income. First, you need to separate your needs from your wants. Shelter, food, health insurance, and some form of transportation are necessities compared to expensive steak dinners or $500/ month car payments. Before buying something, consider whether it is a need or want.  

Next, you should focus on cutting expenses and saving money by buying items on sale, utilizing coupons, canceling subscriptions that you're not using, and repairing items instead of buying new things. Finally, if you have outstanding loans, you should discuss with your creditor about possibly granting a payment extension or lower interest rates until you have secured another source of income.