Spending Lessons for the Newly Unemployed

Justin Schakelman
Careerminds

Consumer spending was up  0.7 percent in February 2011. That’s the eighth straight month of gains. Many economists contend that February’s increase is due to higher gasoline and food prices—a particularly troubling fact, especially for those of us who drive a car and/or eat food to survive. All joking aside, Americans have been doing an excellent job at managing finances during one of the worst economic downturns in modern history. And, that says a lot about how the near double-digit percentage of unemployed workers in this country have managed their debt during a time of crisis.

Discretionary spending has been trending lower since 2008 and savings are up. Considering the economic meltdown was just getting underway in 2008—and many of us were tempted to whip out credit cards because of a sudden loss of savings or income—Americans did the right thing and cut back on disposable income spending and socked more away under their mattresses. As a result, in 2010, we erased more than $65 billion in credit card debt. And, since 2008, American’s credit card debt declined for 27 consecutive months. Impressive.

There’s a lesson to be learned in all of this penny pinching of late. The pinch was, and still is, especially painful for the unemployed. For those of us out of work, we’re spending more than ever on the basics and less than ever on luxuries. If you’ve recently been let go, take note of the wise spending habits that millions of other job seekers are employing to keep expenses low and savings high:

1.      Commit: Commit yourself to cutting back on discretionary spending from the very beginning. Remind yourself that in the end, making coffee at home, and replacing occasional nights out with “stay-cations” can make a big difference and are completely worth it. Don’t think you can enjoy a stay-cation? Click here for some ideas.

2.      Budget! Knowing how much is coming in and how much needs to go out will help you decide how much you need to cut back and where.

3.      Expect the Unexpected: Sometimes things go wrong that we just cannot control. Whether the car needs new tires or the basement floods, you need to be prepared. Make sure that you make some room in your budget for unexpected circumstances.

4.      Have a Plan B, and C, and D. In the event that your unemployment lasts longer than expected, you want to be prepared for that. When you’re budgeting, don’t anticipate having additional income right away, or even a few months in to the future. Plan for a longer unemployment, and if you find a job sooner, then it will be a pleasant surprise. It is important to remain optimistic in your job search, but when it comes to your finances, it doesn’t hurt to plan from a pessimistic perspective. Better safe than sorry!

Job Seekers: Do you have any tricks that have helped you limit your discretionary spending?

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Careerminds provides scalable, strategic solutions to organizations seeking affordable, web-based outplacement services. Using a Web 2.0 e-learning platform that delivers affordable, online career transition services, Careerminds provides a high-tech and high-touch blend of on-demand career transition education supported by senior-level career consultants to help displaced workers reenter the workforce quickly.