There are many situations in your life that you might need to challenge and one of the most difficult is when you lose your job. A part from putting immediately all your energies into looking for a new job through different channels like LinkedIn, recruiting agencies, friends, connections etc.. you might want to adjust your monthly budget as well.
If you are unemployed is extremely important to limit, as much as possible, all kind of unnecessary expenses like restaurant bills, drinks, shopping, beauty products, holidays and subscriptions. This is important considering that you will have to keep some expenses like rent/mortgage, utilities, internet, car, health insurance and groceries almost untouched.
Cut, cut, cut…
Cutting restaurant bills and drinks might sound as the end of your social life forever and ever but in reality it doesn’t, instead of going to a restaurant, you can invite friends for dinner or drinks at home or you’ll be invited to theirs. If they don’t understand your situation, apparently it’s also time to cut some people out of your life and find new ones 🙂
A big cut is also reserved to shopping and beauty products. Most of the time we buy clothes because they’re cheap and fashionable or for example in case of creams because advertisements promised that our face will be lifted and we’ll look ten years younger (if you want to know more about how we are manipulated as consumers check one of my previous articles How Brands Manipulate your Mind). The reality is that we already have a lot of clothes, creams, soaps, shampoo etc… in our closets so stop buying new stuff and use what you already have.
Another expense that you can cut is holidays. Taking a break and going somewhere to relax or visit a new place can be extremely expensive as you might need to take a flight, you’ll need for sure an accommodation (hotel, B&B or Airbnb), you might want to see museums, buy souvenirs and of course you have to eat at least 3 times a day. So in case you don’t have anything already planned, cut this from your budget as long as you’re not able to find a new job. Once you get one, plan a holiday, you’ve deserved it 😉
One of the last expenses that I would suggest to cut is subscriptions, especially if you have opted for monthly payments. Give up for sometime platforms like Netflix, Disney +, Amazon Prime, Spotify etc.. These are not bare necessities like your groceries or your healthcare insurance.
Emergency funds what???
It’s extremely important to have an emergency fund that will save you in case something unexpected happens like your car breaks. If you’ve lost your job this should help you living without incurring in any debts for at least 3 to 6 months or even a year. But this is possible only if you’ve put a certain amount of your salary in your savings account every ,month since you started your career. The best way to manage this is to have an account in a different bank instead of having two within the same bank as you’re not tempted to just transfer some money in your main bank account o buy stuff.
As you can imagine, the combo “reduce the budget and have savings” is the best case scenario. Worst scenario is indeed no combo at all, meaning no savings, or maybe just for a month or two, then what? At this moment you’ll start freaking out because you’ll realize that you need to find a job as fast as possible. Based on where you live the labor market can be full of opportunities (which means that you’ll be able to find a job in the short term period) or not as that area does not attract companies investments and as a consequence head hunters looking for candidates to fill new office spaces. If you recognize yourself in this scenario you’ll need to cut even more from your monthly budget, starting for example from the car.
Drastic (but useful and necessary) cut
Think about the possibility of using public transport or the bicycle as much as possible, this way you reduce the number of times you go to the gas station to refuel. If this is not enough and you can manage to live without a car for sometime, you can sell it and put the money in a savings account. Once you’ll reach a financial stability again, then you can think about buying a new/second hand car.
Another useful tip, which is applicable all the time but in this case more than ever, is to check your utilities contracts and search if there are cheaper operators in the market. If yes, switch and sign a new contract with a new gas/energy company (use the same logic for your Internet/Mobile provider). Also pay attention to not keep the lights on in rooms where you’re not in or let the water run for no reason. It seams stupid but this energy/water waste will make your bill higher.
- make a list of all your expenses and split them in necessary and unnecessary
- cut as much as possible the unnecessary expenses
- if you have it, use the money from your savings account
- try to find out from the necessary expenses if you have margin to reduce them (i.e. find a cheaper utilities operator)
Suggested content to deep dive on the budgeting topic:
If you want to learn more about Saving funds I suggest you to watch three video on The Financial Diet YouTube channel: Everything You Need To Know About Emergency Funds | The 3-Minute Guide, How To Save An Emergency Fund and The 4 Savings Accounts Everyone Needs.