Managing Finances during a Job Transition

If you are one of the hundreds of thousands of Americans facing a period of job transition, you are probably worried about how to handle expenses with a curtailed income. One of the major mistakes people make during this time is not sitting down and creating a realistic budget to balance income with outgo. Too many remain in denial about their actual needs, and instead of cutting back, simply reallocate funds to accommodate their wants. This often leads to unnecessary debt and damaged credit histories.

To keep your debt from accumulating and creditors from hounding at your door, you need a clear cut plan to manage your cash flow. Rule of thumb: credit should be used sparingly and only when necessary. As a matter of fact, use your credit as a last resort when cash is not readily available. See if you can negotiate the APRs with your lenders or transfer debt from higher interest cards to one with a lower APR.

So what cash is available to you? If you have been laid off, you should have a severance package as well as state unemployment funds coming to you. If you have been especially prudent, you should have some savings to tide you over. Take an accounting of all of your assets, both personal valuables and real estate and then decide if you can liquidate any assets to create ready cash. Stocks and other investments, as well as your 401(k) may help supplement your income during this transition.

Take a hard look at your bills and decide what can be purged and what is really necessary. Mortgages, rent, and groceries, of course, are definite necessities. As is insurance coverage. Cable television is not. If you are a two-car family, decide whether it is worth the gas and upkeep to maintain two cars. At the least, determine if one can be traded down. Check with your cell phone carriers to see if your monthly payments can be negotiated for lower rates. Do you really need that lawn service or can a family member maintain the grass? If your children are enrolled in private school, consider a temporary transfer to public school.

Miscellany and entertainment expenses should be severely limited. Eating out may still be an option, but find places that are less extravagant. If going to the movies is a traditional family outing, consider matinees instead of the more expensive late afternoon showings. Or better yet, take this opportunity to do some outdoor and free- activities together. Frugal living isn’t that hard to do. Coupons can help cut back on grocery expenses while high-end resale shops sometimes have great quality clothing and items for discount prices. Instead of shopping at front-end stores and shops, check classifieds and yard sales for good deals.

One cautionary note: don’t let desperation lead you to seek payday or other usurious loans. These quick cash fixes come with heavy interest rates that can put you in an even worse financial position. They will compromise your overall credit health, which you will regret for years to come.

Psychologically, a job transition is a very stressful period. Emotions fluctuate, especially if the transition is longer than anticipated. Maintaining your financial health goes a long way to keeping your stress at bay, and helps you bounce back more readily when your fortunes take a turn for the better. So, manage your money smartly by being cash smart and credit wary.