How To Budget for Long-Term Unemployment

5 Steps for Stabilizing Your Finances Between Jobs

Young woman looking for work

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Long-term unemployment—defined by the U.S. Bureau of Labor Statistics as being unemployed for 27 weeks (roughly six months) or longer—continues to increase, even as regular unemployment declines. As of May 2021, 3.8 million workers, or 40.9% of all unemployed workers, were classified as “long-term unemployed,” according to the latest report from the statistics bureau.

If you’re one of the many Americans facing long-term unemployment, it’s still possible to maintain a budget that will sustain this newfound reality for you. These five tips will help as a starting point, and possibly increase your income as well.

Start Early

As soon as possible, take charge of your situation.

“If your job will be affected long term, it’s better to immediately reassess your budget rather than wait until you use up the majority of your savings,” Steffa Mantilla, a certified financial education instructor (CFEI) who runs financial blog Money Tamer, told The Balance in an email. “By taking stock early of your expenses and what can be cut to save money, you’ll lower your monthly income needs, which will make your emergency fund last longer.”

The sooner you start analyzing your monthly cash flow, savings, etc., the sooner you can formulate a plan to determine what you’ll need to do to stabilize your finances.

Differentiate Wants From Needs

The next step is to categorize all of your expenses into one of two categories: wants (or essentials) and needs (or desires). “If you’re jobless, your barebones budget is going to contain only what you need to survive,” Mantilla said. According to the instructor, it’s an uncomfortable process that’s tough to get used to, but worth it in the long run.

“Expenses that fall into the ‘needs’ category include food, clothing, and shelter, although you can still save money in this category,” Mantilla said.

If you need clothes for yourself or your family, Mantilla recommends visiting thrift stores for new or used clothing, rather than shopping at big-name retailers. The same goes for grocery shopping, in that you should seek out discount shops, like Aldi, rather than stores known for being expensive, such as Whole Foods.

Utilities are also essential, but according to Andrea Woroch, a California-based family finance and budgeting expert, you can save on them as well. “Because electronics still use energy when plugged in even in the off mode, you could be wasting unnecessary energy, which hikes up your utility bill,” Woroch said in an email to The Balance. As a fix, she suggests getting in the habit of unplugging devices when they’re not in use, and investing in a power strip.

Here’s something else to think about: If you and your spouse/partner have two or more cars, and one person works from home while the other is currently unemployed, Woroch recommends you consider getting rid of one of the vehicles. “Not only will this wipe away any monthly auto loan or lease payment, but it will also reduce your auto insurance cost,” Woroch said.

If you have cable and you don’t want to cut it off completely, consider a bare basics plan as a method of cutting down on entertainment. According to Mantilla, a lot of providers strive to keep current customers, and may offer a discount if they think you’ll transfer to a competitor.

Stay on Top of Your Unemployment Paperwork

If you’re receiving unemployment benefits, be sure to stay on top of any forms that need to be submitted. Most states allow you to file weekly claims online or on the phone, which makes the process easier. However, since state offices are so overwhelmed with requests right now, they may not be able to answer the phone or send email messages in a timely manner to each individual. This means that you need to assume responsibility for staying abreast of any changes that could affect your unemployment compensation.

For example, in some states, you’ll also need to complete a quarterly recertification for continued eligibility. Instead of waiting for the form to arrive in the mail, you can download it from your state’s Department of Labor office. It’s also a good idea to check the designated unemployment website (and associated media accounts) on a regular basis for updates and notifications that may affect your eligibility.

Look for Side-Hustle Opportunities

For many people, it’s possible that skills you’ve acquired in your primary job are transferable to other freelance positions in the workforce.

“There are hundreds of small online businesses who hire freelance services for marketing, ghostwriting, copywriting, graphic design, social media management, and more,” Mantilla said. “If you have examples of past work, you can build up a client portfolio that will grow by word of mouth throughout the online entrepreneur community.” As a starting point for finding relevant work, consider looking through Facebook groups and chat rooms.

Don’t forget that if you’re receiving unemployment compensation, you’ll need to report the new form of income you acquire through freelance work.

Woroch also has other recommendations for earning an income while on the search for a full-time job:

  • Becoming a virtual tutor: “This position gives you the ability to create your own schedule based on your availability,” she said.
  • Pet sitting: According to Woroch, some companies, including national brand Rover, can provide you with an income of up to $1,000 a month if you make the commitment to the job.
  • Taking part in odd jobs: “Otherwise, or in addition, run deliveries through Postmates, or help people with odd jobs like yard work or furniture building through TaskRabbit,” Woroch said. And, if you’re good with kids, there are working parents looking for help to watch or home-school their kids right now. To offer your services to your local community, try using Facebook, Nextdoor or
  • Joining online focus groups or surveys: “You can take surveys via Swagbucks or Survey Junkie toward gift cards that you can use to buy household essentials; sign up for 2020|Panel to apply for virtual focus group participation with payouts as much as $500 for some surveys,” Woroch said.
  • Selling items you no longer use: While you do your seasonal cleaning and decluttering, consider selling clothing and objects around your home that you no longer use through various smartphone apps or websites, such as Poshmark or Facebook Marketplace.

Use Loans as a Last Resort and Use Credit Wisely

If you’re finding you are getting closer and closer to debt, you may consider getting a loan to pay some of your expenses. Personal loans have more favorable rates compared to payday loans and credit cards. “However, if you’re in a bad financial situation, most banks will see you as a risk to loan money to,” which may only qualify you for high interest rates, Mantilla said.

If you have a mortgage, you may consider mortgage relief or refinancing, especially with rates in the United States reaching historic lows. “You can even ask about adding any fees into the loan so you don’t have to spend any money out of pocket,” Woroch said. “It’s not ideal to take on a longer term, but since housing costs usually eat up a big portion of consumer budgets, this is a fast way to reduce your living expenses.” And, when your financial situation stabilizes, Woroch recommends paying an extra amount each month to pay off your mortgage faster.

Another idea is to transfer your credit card balance to one card. “Look for a new credit card offering 0% interest on balance transfers, with some options for as long as 21 months,” Woroch said. “This buys you more time to make smaller payments without racking up crazy interest fees, and the money you’re actually paying toward the account is actually applied to the principal balance."

If you choose to consolidate your expenses, be aware that for most balance transfers, the promotional interest rate only lasts for a limited time. When that time expires, the interest rate on your card may rise, increasing the amount you need to pay.

Article Sources

  1. U.S. Bureau of Labor Statistics. "News Release."

  2. U.S. Department of Labor. "State Labor Offices."

  3. Freddie Mac. "Mortgage Rates Remain Flat."