Most of us are well-meaning but ineffectual when it comes to budgeting. We often promise ourselves that this is the year we'll get serious about saving money, only to find that we never have quite enough left to save.

Those who just suffered a job loss no longer have that luxury. Suddenly, a renewed focus on budgeting isn't optional, but rather an absolute necessity.

With that in mind, let's review some smart budgeting tips to follow in the wake of a job loss.

Make Cuts by Prioritizing Needs Over Wants

The first step toward modifying your budget is a rigorous examination of your needs and your wants. Prepare a list of all of your monthly expenses, then follow that up with a list of your current income and savings. A quick calculation should show you how quickly your savings will dissipate under your current spending routine.

Once you've created a comprehensive list, begin ranking your expenses in order of priority. A mortgage or rent payment should rank at the top, while day to day indulgences such as coffee or eating at restaurants should rank at the bottom. Once you've arranged everything according to priority, take out the budget scalpel and start cutting.

Contact Your Creditors

Rolling monthly expenses such as credit card bills and student loan payments don't suddenly disappear if you've lost your job. The inability to meet these obligations is a major stressor for those who are recently out of work. In some cases, they decide to ignore this problem because they don't want to face it, allowing it to fester and get worse.

This is the worst possible outcome. Many creditors will work with you after a job loss, as long as you make a good faith effort to address your situation. There are also programs available to student loan holders that can defer your payments, buying you time to find another job. By making these moves, you can lower your monthly expenses, taking serious pressure off your new, smaller budget.

Look Into Other Resources

If you've slashed your budget and negotiated with creditors and you're still in a significant hole, it may be time to consider other income-producing options. These include a loan from your 401k (which should only be pursued in relatively dire circumstances, given the tax penalties), or perhaps something more unorthodox, such as leasing space in your residence through an online service or pursuing a money-generating hobby or side business.

The Takeaway

Proper budgeting is never more important than during the period following a job loss. By cutting out non-necessities, negotiating better terms from creditors and tapping other income-generating resources, you can put yourself in the best position to prosper.

 

Source: MoneyEdu