So you have just heard that you will be joining the 524,000 people who became unemployed last month. I hope you followed the advice to have a cushion of money in savings. If not, you will have to rely on unemployment for cash. But whatever the source of your money, you will have to stop spending much of it as soon as possible. However, there are always bills to pay. A report discussing tax rebates as a way to stimulate the economy said that one of the cons was that people often used the money to pay bills instead of spending it. Of course, paying bills is a form of spending. And paying bills will account for most of your spending when you are unemployed, the only place you need to do a lot of shopping is the grocery store. It may not help the rest of the economy, but it is what you need to do.

Dan Esparza / flickr |

Dan Esparza / flickr source

Prioritize Your Expenses

To start planning a budget, you need to find out what your unemployment benefits will be (say $326 per week, for example). This varies by state, but will be about $1,500 per month. It usually lasts 26 weeks, but may be extended during this recession. Once you know how much you will be getting, you can start planning your budget. You’ve probably heard the example of filling a box with big rocks and sand. You have to put the big rocks in first, and pour the sand around them. The big rocks will be housing payments, health insurance, tuition payments, and car payments. Figure out if you can make these payments, or how you will reduce or eliminate them if you can’t afford to keep paying them. Eliminating them will mean big changes to your life, but if you make the choice quickly, you will be able to survive longer, using the money you have for other necessities.

Rent or mortgage payments are likely to be the biggest part of your spending. If the payments are less than about $700, you can consider staying where you are. If you are renting, you could also move in with friends or back in with your parents. If you don’t have a place to move to immediately, start scanning the classifieds a cheaper place for when your lease expires. Most likely, you will have to keep paying until your lease expires or your apartment is rented. If you are paying a mortgage, the choices are keeping up your payments or walking away. If your budget shows you can almost make your mortgage payment, talk to your bank. If you come to them with a good plan they might be able to lower your payment. You should also consider renting out a room. Walking away is not a good choice, but the point of looking at your budget is to see if you would be forced to walk away soon anyway. In that case, looking for a cheaper place to live now is the better of two bad options. Utility bills are linked to how you choose to handle housing. Moving in with your parents or friends will eliminate these, although you will probably be expected to pay some towards their bills. You can try to use less electricity, heat and water. Turn the heat down to 65, and wear warm clothes. Sell off spare TVs and electrical gadgets to earn money and save electricity, many draw power even if you leave them off. If you are paying for both a cell phone and land line, cancel one or the other. A cell phone is better if you are not sure where you will be living. Cancel cable TV.

Another big part of your budget will be health care. Here you may have the choice of continuing your current coverage under COBRA (the Consolidated Omnibus Budget Reconciliation Act), which lets you keep you employer’s health care plan if you can pay for it. If you can’t, you have other choices: finding a cheaper individual policy, or saving the most money by becoming uninsured as well as unemployed. Most people decide they can’t afford COBRA. If the choice is between some other health insurance or none, compare quotes at There are plans under $150 per month for one person.

School expenses will be a big problem for parents with kids in college or private schools. There are no really good answers. College kids can try to get scholarships, financial aid or work-study jobs at their school, but these are not always available. Parents can consider putting their private school kids in public school instead. However, this might conflict with the reasons they chose private school, and kids do not usually like changing schools.

Car payments are another big expense. You will have to decide whether or not to keep the car. First, you should be saving on gas by only going out when you absolutely have to, such as for a job interview, employment workshop, or to get food. If you can find another way to make these trips, you do not need a car. If the car is paid off or you absolutely can’t get around without it, keep it. If you absolutely need it but can’t afford to keep it, ask about trading it in for a cheaper model. If you sell your car, you will also save on insurance and registration fees. You can shop for lower auto insurance on

Food is the last major expense of an unemployed person. You should leave about $200 in your budget for it, but it is not a single payment. If you don’t have much savings, you may qualify for food stamps, which give $21 a week or about $100 per month. You can check out you eligibility for food stamps at

Should you use your credit cards or lose them? Credit cards can give you a cushion as you wait for your first unemployment check. After that it would be best to pay them off and put them away. It may be that you have so much debt you can’t pay them off, and even making the minimum payment is a “big rock” You hopefully have credit insurance to make that payment for you. Keep your credit cards available for real emergencies, but do not use them for monthly expenses.

Check your bank accounts for fees. If you were having your fees waived because your paycheck was direct deposited, you might now be subject to fees. Or you might fall below the minimum requirement to have your fees waived. See if your bank offers a more basic checking account, or search for a bank that does not have minimum requirements.

Do you taxes carefully. Unemployment checks are subject to tax, even if you opt not to have it withheld when you start receiving them. If you took money out of an IRA or 401(k) plan, you may have tax penalties. But if you worked for most of 2008, you may still have a refund coming. Do not squander any of your refund by taking advantage of the rebate loans to get the money now. It will cost you interest, and delay your effort to live within your budget.

The Unemployment Diet

Here are some suggestions on how to eat cheaply. Learn to cook. Start with something simple like pancakes. For breakfast, store brand waffles have gone up from $1.19 to $1.79, but are still sometimes on sale for $1. A box of 10 is good for 5 meals if you are thrifty. Pancakes made from mix are a bit cheaper and more filling. Be sure to read the back of the box and get the kind that is “just add water” so you don’t need to get extra ingredients. Actually, the mix where the instructions ask for milk and eggs does more or less work if you only add water. You can also have 6 pancakes from a cup of pancake mix, vs. 2 frozen waffles. The round bulk packages of plain oatmeal are cheaper than the individually packaged bags of maple & brown sugar (or other) flavored oatmeal. Toast is cheap, and sometimes almost expired bread is on sale for 50 cents. Cereal is kind of bad because it is relatively expensive and tempting to eat half a box at a time.

Eat some of the old favorites for lunch. These are the famous peanut butter and jam sandwich, the grilled (or toasted) cheese sandwich, and the bacon, lettuce and tomato sandwich. Add some canned soup or Raman noodles, the cheaper ones that are a brick in a bag, not the more expensive ones that come in a bowl you can add water to.

For a healthy snack, you can have an apple, banana, orange, or yogurt. These are about 25-50 cents each.

For dinner, frozen microwave meals give a lot of variety to people who can’t cook, look for sales where they are $2. Michelina TV dinners are often $1. You can cook spaghetti if you can boil water. Look for cheaper packages of meat, on sale because it is almost expired. Frozen or take out pizza is often good for two meals, save some for tomorrow’s lunch. You can get fish in the meat section of the store or frozen microwavable packages.

Give up luxuries like eating out, and expensive bad habits like smoking. Drink less alcohol and pop, drink tap water instead. If you must eat out, the value menu hamburgers are not all that different from the regular menu burgers.

Make lists of what you need before you go shopping. Look for bargains in advertisements and look for coupons. They are often in the Sunday paper, which is also a good source of job ads. But always compare prices to the store brands. Even with a coupon, name brands are often more expensive.

Be aware of unit costs. For example, you might be able to get 38 trash bags for $6.19, or 90 of the same type for $10.99. Each bag in the cheaper box costs 16 cents; each bag in the more expensive box only costs 12 cents. Stock up on thing that won’t go bad if they are on sale and the cost isn’t excessive. 90 trash bags should last until the economy improves. I hope.

So now you have considered the “big rocks”. You have some idea how much money you will need each month and considered if and how you can eliminate the big payments. You will know if you can survive on unemployment alone, or need to also draw on some of your savings to make ends meet. Here is some final advice on how to deal with unemployment. Beware of “phishing”, scam emails from the unemployment office asking for your personal information or unemployment agency sign on and password. Banks don’t ask for that kind of information, and neither does do unemployment offices. Internet connections are very useful for looking for work, so beware of cutting them off. . But don’t use “I need my internet connection” as an excuse to keep expensive cable or hang out in places with free wireless but really expensive coffee. Use the library for internet access and entertainment. Libraries often have shared computers you can use, or wireless connections. They also have books you can read, and often movies you can check out for free.

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