Sticking to a budget sounds so simple. Yet, even in the best of times, it’s hard. And the struggle only intensifies after a layoff, when a lean spending plan’s exactly what you need to stay afloat.
A lot of us have been in that situation. About 8.7 million jobs were lost between the start of the Great Recession in December 2007 and early 2010 (more than that have since been added, but not always the same ones). And major companies from Macy’s to Microsoft laid off thousands of employees in 2016.
I’ve been there twice—most recently in August 2016.
I was better prepared the second time: I had $7,000 in emergency savings I’d been building up for a couple years—enough to carry me five months. And I was fortunate to be able to pick up freelance jobs while I looked. But I still had to change my habits if I didn’t want to run out of money before I found a full-time gig.
Fortunately, I got a new job a few months later. But in the meantime, I was actually able to increase my savings. Here’s how.
I lined up enough income to cover essentials ASAP.
I’d already created a game plan, which I’d started working on (and wrote about) the previous month when I saw the writing on the wall at work.
In addition to buying health insurance (via the Obamacare marketplace) and settling my severance package, my top priority was tallying my bottom-line expenses—student loans, rent and other essentials—which equaled $1,400. Then I contacted my freelance writing clients to line up more projects with the goal of earning at least that much to avoid dipping into savings.
I know, I was fortunate to have a side gig and contacts already, but there are ways to bring in extra income almost immediately to offset expenses, and tools and platforms to help turn your interests into income, if you don’t find full-time work quickly.
I cut basic expenses.
By switching to a different cell phone carrier, I saved $25 and got unlimited data. I also canceled my life insurance—I don’t have any dependents—which saved another $20 a month. Not really big bucks, but every dollar counts. Had my unemployment dragged on, I would have considered negotiating other policies, like my car insurance.
I saved some of the surplus.
Living on freelance paychecks alone meant my cash flow was uneven. Some weeks I earned a lot, and other weeks I had no work—and no income. Holding onto any excess funds after paying my bills was essential to helping me ride out the lulls.
I also tried to put aside 15 percent of every check for savings (provided there was enough for my bills that month). Not only did this pump up my cushion, but it kept saving top of mind. So much so that by the time I started my new job, I’d saved another $700.
But I didn’t totally deprive myself, either.
I didn’t want to neglect my friendships, so I looked for cheaper ways to hang out. I did an occasional night out, but more often I’d cook instead of going out or watch movies on Netflix instead of new releases. My friends were supportive and helped keep my spirits up over those four months, which was a big deal.
In the end, I learned that scaling back—on fun and expenses—isn’t as hard as it seems. I wouldn’t say I want to go through a third lay off, but proving I had the discipline to not only protect my savings, but add to it, during a big financial transition gave me confidence that I could weather future setbacks, too.