smart spending

Personal finances after unemployment

Debt notebook
Highlights
  • First get your past-due bills caught up and buy what you need to live.
  • Next shore up your emergency savings; then your retirement account.
  • Focus on paying high-interest debt first. Contact a CFP to create a plan.

Though the economic recovery may be barely perceptible, some employers are starting to hire again. Nevertheless, new employees who lose ground during a protracted period of unemployment may have trouble shoring up their personal finances after landing a new job.

If you were out of work for an extended period of time, you may have depleted your short-term savings accounts and fallen behind on payments. You also likely stopped contributing to your retirement savings plan, and may even have had to take out a 401(k) loan or withdraw money from your retirement account.

Now that you're back among the ranks of the employed, what should you focus on first?

Take a triage approach

"The first thing you should do is make yourself whole again," says Eleanor Blayney, consumer advocate for the Certified Financial Planners Board of Standards in McLean, Va. "The first thing you should concentrate on is your day-to-day living expenses and, if your bills are past due, getting those up to date."

Once you are "whole," you can start rebuilding your short-term emergency savings accounts, paying off debt and rebuilding long-term savings, she says.

"The most important thing is to make a plan," says Blayney. "If you need help making a plan, an hour with a Certified Financial Planner could be well worth it, or you might find some free seminars in your community."

If you're making significantly less money than you were before and you cannot catch up with your past due bills, Blayney recommends seeking help from a not-for-profit consumer credit counseling agency associated with the National Foundation for Credit Counseling.

One person's journey

Crystal Williamson, who lives in New York City, was a long-term contract computer trainer for law and financial institutions when she was laid off from a regular paying assignment two years ago. She did work for a little less than half the year in 2009. After that job ended, she was able to collect unemployment, but it didn't pay enough to cover her mortgage payment.

While she was looking for work, her telephones were cut off and her mortgage and credit card payments fell behind. She found a full-time job in April, before she had to think about liquidating her retirement savings.

advertisement

"When I was out of work, the credit cards were low on the priority list as I wasn't even making enough to live," says Williamson. "I'm making enough to pay for living expenses now, but I'm living very frugally."

 

Show Bankrate's community sharing policy
          Connect with us
REFINANCE HOME EQUITY AUTO CDs CREDIT CARDS
Product Rate Change Last week
30 year fixed refi 4.05%  0.06 3.99%
15 year fixed refi 3.11%  0.01 3.10%
10 year fixed refi 3.17%  0.04 3.13%
 
View Rates in your area Next
Product Rate Change Last week
30K FICO-based HELOC 4.32%  0.01 4.31%
50K FICO-based HELOC 4.06% --0.00 4.06%
100K FICO-based HELOC 3.92% --0.00 3.92%
 
View Rates in your area Next
Product Rate Change Last week
60 month used car loan 2.81% --0.00 2.81%
48 month used car loan 3.04% --0.00 3.04%
60 month new car loan 3.24% --0.00 3.24%
 
View Rates in your area Next
Product Rate Change Last week
1 Year CD 0.99%  0.01 0.98%
2 Year CD 1.19%  0.02 1.17%
5 Year CD 1.84%  0.01 1.85%
 
View Rates in your area Next
Product Rate Change Last week
Balance Transfer Cards 15.73%  0.01 15.72%
Cash Back Cards 16.43% --0.00 16.43%
Low Interest Cards 10.98%  0.02 10.96%
 
Next
advertisement
FRUGAL NEWSLETTER

Discover new ways to cut costs and save more every day. Reduce your spending, not life’s pleasures. Delivered weekly.

advertisement
Partner Center
advertisement

Connect with us