Last fall I received a text from my husband telling me that he was being let go and would be home soon. To be quite honest, he went through a lot of turmoil in the five years he was with his previous company, surviving a buyout by a larger corporation, several bosses, and less-than-ideal working conditions for sure (such as spending the night at the office several times and coming home just for Christmas).
So it’s not like we weren’t a little happy that he was finally relieved of this job and had proper motivation to look for another. The tricky part, however, was that he had also started college full-time last fall and was loving it. Classes were as close to night as he could get, which meant 4:30 on Mondays and Wednesdays and 5:30 on Tuesdays and Thursdays, with no classes on Fridays-Sundays. So we needed him to find a job that was okay with him continuing with classes if at all possible.
How to Survive Unemployment Financially
Fast forward five months, and Paul is now gainfully employed. While this job is not ideal either, in that he is quite underemployed as far as pay is concerned, we are happy he is back at work with a company that is flexible about his classes (score!).
Now that we are on the other end of a stint of unemployment, I wanted to discuss how it was that we were able to survive the five months financially.
Cut Back on Expenditures
Instead of living in denial about our change in circumstances (you see that a lot on financial TV shows such as Gail Vaz-Oxlade’s ‘Til Debt Do Us Part and callers on The Suze Orman Show), we immediately made drastic cuts to our spending. We knew it could be awhile before Paul was able to find a job that would suit him (and of course, technically he’s still in the job market), so we took our personal spending money down by 50%, lived off of free entertainment such as free museum and zoo days, and used all of our frequent flyer miles to travel home for free for Christmas.
Severance Package and Unemployment Compensation
We were a bit hesitant about unemployment compensation, but when we found out that each company has to pay into the state’s unemployment fund in accordance with how many people they let go, we were fine with it. On top of that, Paul received a small severance package.
Fully Funded Emergency Fund
I know you hear about the importance of setting aside money until you fully fund your emergency fund, but I hope that you take this advice to heart. One of the biggest reasons why we didn’t freak out during this 5-month stint was because we had a fully funded emergency fund. This meant that in the good times, we diligently saved our money so that the bad times weren’t that bad at all.
In fact, since we paid off our non-mortgage debt in 2010 (another great reason why we survived our unemployment financially) and we live so frugally, we actually did not need to touch our emergency savings at all! What a relief that was.
We Paid Off All of Our Non-Mortgage Debt
I am a huge proponent of paying off your debt early. In our case, we paid off all of our non-mortgage debt a full ten years before our creditors wanted us to be out of debt. And thank goodness we did; we were sending in $950 per month when we were in debt payoff mode, and that would have been enough to have us running to our savings each month to cover our living expenses and not get behind in our creditor payments.
Our Home is Below 30% of Our Take Home Pay
I know that financial gurus tell you to keep your home mortgage costs to no more than 30% of your take-home pay. While lenders would have enabled us to take out a mortgage that is twice as large as we did, we simply didn’t want that anchor around our necks. So our mortgage plus escrow payments are lower than 30% of our take home pay, which helped a lot when our monthly cash flow took a dive.
We Worked Together
If there were extra things that came up, such as a medication or even kitty litter, we took turns buying these items from our individual spending money (the one we cut to 50%) instead of taking more money out of our account. This really helped, even though it meant that sometimes we didn’t have much to spend. Since we took advantage of some great free activities in our city, we were never bored. It was also a great amount of time that we got to spend together (gotta look on the bright side, right?).
Have you ever been unemployed? For how long, and how did you survive it?