June 01, 2011

My Response to the 1st Case Scenario - Unemployment

My husband has never been unemployed, but with what has gone on over the past few years we have discussed what we would do if he eve became unemployed.  Here is what I have come up with from our conversations.  I would be interested to hear from anyone that has gone through this to see if I am covering all the bases.

1. If you belong to a spiritual community such as a church or synagogue, call your pastor or rabbi and let him know of you situation. You will need spiritual support during this time.

2. Stop spending any money and start hoarding it.

3. Immediately file for unemployment benefits. Unemployment is income to tide you over until you get a job, but it is not a lot of money. I did some researching and the average unemployment benefit is $295.00 per week. This figure does not say how many dependents are in the family. Let’s just say that whatever you receive it will be a lot less than your salary. A rule of thumb is that unemployment benefits are 40% of your prior income or even less.

4. Look into your health insurance benefits – depending on when you get lose your job, your benefits usually continue until the end of the month. Then you are on your own. There is COBRA which can be quite expensive or you can go the alternative route of getting your own health insurance. If at all possible do whatever you can to get some kind of health insurance. It may have a high deductible of $5,000 but it won’t totally bankrupt you if you have a catastrophic illness or accident. In the mean time, do whatever you can to take care of yourself so that you don’t get sick. I know, it will be hard since you will be going through a stressful time in your life, but you still need to eat and get your rest.

5. Look at what financial resources you have available. Review money in checking and savings, go through your wallet or purse.

6. Contact your creditors and make a list of your debts and your current payments. In my opinion, and I am not a financial consultant, your mortgage or rent, along with food should be your first priority to pay. You need a place to live and you must eat.

Next look at what money you have coming in and then look at what you can pay to your creditors. Immediately call all of your creditors and let them know that you are unemployed. You must do this before you quit sending any payments and default. Be up front and honest about your situation. Set up a payment plan if possible and see if your payments can be reduced temporarily.

When I say all creditors, this means credit cards, car loans, mortgage and any company or person that you owe money. Perhaps for the first time in your life you will not have enough money to pay all of your bills. It will be a shock and you may feel ashamed but you are not alone. Others have walked the same road.

When you set up a payment plan even if the payments are reduced, make sure you can actually pay the reduced amount before agreeing to it. Think about it and make sure. You don’t want to agree and then realize that you can’t make that payment. That is why it is important to make a list of your creditors along with the required monthly payments in order to see what you can now afford to pay while you are unemployed. Have this list next to you when your call your creditors and negotiate a reduced payment or negotiate to have your payments suspended for a couple of months.

7. Review what food you have on hand, include in this toiletries and paper products.

8. Barter services. Perhaps you can mow the lawn for the person that cuts your hair (hey, it’s worth it to ask) or now is the time to go to a “Cost Cutters” or other low cost hair salon. I learned to cut my son’s and my husband’s hair. I paid for the clippers and after 1 haircut each, the clippers were paid for.

You could barter services with someone who has a large garden in order to get fresh produce.

9. Find a way to earn some extra money. Being unemployed means that you need to swallow your pride and do what is necessary to live and pay your bills. Perhaps you will need to mow lawns, do odd jobs or work a part time job at McDonalds but you need to somehow come up with some extra money.

If the only breadwinner is a man and he is now unemployed, the
wife can help with additional income by cleaning houses, running a daycare or looking for employment herself to help make ends meet. The age of the children at home will determine which avenue the wife goes. I know of women that have waitressed to bring in extra money or taken on a job at McDonalds. Even delivering newspapers in the early morning brings in some money. Any extra money is better than what you don’t have now.

10. Cancel non-essential services. Cancel your cablevision. I would keep the internet but cancel cable. Having the internet will help with your job search. Research cheaper internet options than what you presently have. This could force you to search around to save some money.

Other non-essential services that you may have to cancel would be a gym membership, movie membership such as Netflix, subscriptions. Re-acquaint yourself with the Public Library for free movie rentals.

Perhaps cancel a land line and go with a cell phone or vice versa. Remember non-essentials are just that – non-essential for life.

11. Reduce the cost of essential expenses.

Food, utilities, clothing and shelter are examples of essential items. Within the essential category there are ways to save money. For example, lower the thermostat in the winter and wear sweaters and sweat pants – even long underwear to keep warm, and in the summer time don’t use the air conditioning until it is unbearably and dangerously hot. Close the curtains or drapes to keep the heat out in the day. We live in an old house and although the basement isn’t finished so to speak, it does have poured cement floors and brick foundation walls. It is cool down there and we have put a rug on the floor and old furniture. I have even slept on a cot in the basement when it was hot and I didn’t want to run the air conditioning.

Turn off the lights at night and use minimal electricity. Teach everyone to not turn on the lights unless absolutely necessary. Line dry your clothes and if it is winter, you can hang them up to dry in the basement or anywhere else in the house.

Quit buying paper towels and use rags instead. Don’t buy anything without thinking if it is a necessity or not.

As to food you will need to learn to cook frugal and humble meals and use store brands or generics. Spending as little money as possible is the mode of the day.

However with food, you will also need to lower your standards and buy the store brand or generic oatmeal and really cut back to a needs only grocery budget. After all you really don’t need soda but you do need milk. You need milk but not to drink every time you are thirsty, that is what water is for.

When you buy groceries, do not buy soda or snack foods, buy only the essential good food that you will need. For many people this will be one of those eye opener experiences as before they just threw whatever they wanted into the grocery cart. Now you must plan to make every penny stretch (yeah, you’re beyond stretching dollars and should be stretching pennies). Buying chicken hindquarters and cutting them into thighs and drumsticks may be new to you.

If you have a store that doubles coupons and have never used coupons before, now is the time to check into this great money saving tool.

Car pool, walk or ride your bike to cut down on gasoline consumption.

12. Investigate any resources in your community for the unemployed. Learn what is out there to help you out such as a Food Pantry in case it is needed. If you are in need of clothing, consider garage sales or Goodwill. Some churches have clothing outreach ministries in which they give clothes away.

Do you qualify for food assistance? Check into it. If you qualify you will be able to take what money you would spend on food and divert it towards your housing.

13. Do not isolate yourself from others. You need the social contact and support of your family and friends. A lot of people have been unemployed in the past few years and it is nothing to be ashamed of. It happens. Allow people to help you and minister to you. In turn, if you have extra time volunteer to an organization.

14. Begin your job search. Update your resume and seek any help for preparing a good resume and help with your interviewing skills.

4 comments:

Phoebe said...

okay so after reading your original post I've only done the following: I transferred more money to our savings account. It is pitifully low. My spouse being a state employee and the state making major cuts may just be affected by this whole mess. Plus just read an article where a man was quoted as saying we are on the verge of a major major depression. Don't know if this is just rhetoric but I did read it.

Martha said...

@Phoebe:

I heard on the news that we may be facing what they refer to as a "Double Dip" Recession or two recessions back to back. It is possible that due to high food prices, gas prices being high and more home foreclosures along with the fact that the equity in our homes is going down that we may be facing some more hard times or rather a continuation of hard times.

My response is that this could or could not happen. I cannot control the economy, but I can take steps to protect my family. Just plug along and do whatever you can.

Don't live in fear, make a plan and cut back and continue to put some money in the bank for that "rainy day."

Anonymous said...

Unfortunately it doesn't seem that we'll be getting out of this recession any time soon. Some of the mistakes that some seem to make are:

- Not getting out of debt, continuing to add debt, not thinking that a job loss could happen to them. (Getting out of debt will give anyone more peace of mind, and more freed up money, while employed, and especially if unemployed.)

- Continuing to live a life of many extras. (I see way too many middle class/upper middle class folks struggling with this. Then when unemployment hits, they are lost because they are still in debt, and don't want to give up the good life they've been living all along.)

I have felt that when this recession started, that some (not all) lower income folks (including my family) have somewhat handled things better, because we've been used to living on less all along. We are used to living with less extras, having to cut back, living a more simpler life. We didn't crumble when life continued to get more financially difficult (and still continues).

Just my opinion what's helped us as I've seen these scenarios quite often. Better to be prepared now, then later. None of us can think it can't happen to us.

Lyn

Anonymous said...

Martha, your last comment paragraph says it very well.

Lyn