Debits vs. Credits

If you're lucky, you're going to be able to meet your reduced expenses on your reduced income. However, if you still have more going out than coming in, take another look at your expenses to determine if there is anything else you can cut. If there's not, it's time to examine your income to determine if there is any way to increase your earnings in the short term. Although it might be tempting to dip into your savings or your retirement plan to keep afloat while you're out of work, your savings should be preserved if at all possible for emergencies because once you start spending that money to pay for regular expenses, it will evaporate quickly.

Most unemployed people would rather devote every spare moment to their job search. However, you might find you need to get a part time job to make ends meet while you're unemployed. The good news is that even if you are on unemployment, most states allow you to earn a small amount without reducing or cutting your benefits. Possible part time jobs include gas station or convenience store attendant, substitute teacher, or temping. See the section of the book called Making Money for more suggestions.

What to Pay First

You're legally obligated to pay all of your bills, however, not all of your bills are equally important in terms of keeping a roof over your head and food in your belly. The most important bills to pay in terms of survival are housing expenses (including rent/mortgage and utility bills), food, and at least emergency health insurance so that if a catastrophe strikes you'll be covered.

It's also important to be honest with your creditors and tell them that you're going through tough times and ask how they can work with you to maintain your good credit. Chances are that if you're honest and explain the situation, they'll reduce your payments or make special arrangements to help you through your tough times. However, you should remember that they're not doing this out of the goodness of their hearts; it makes good business sense to help you get back on your feet so that when you are they can collect on their loans. Utility companies are always willing to work with you if you're honest with them and they'll usually break up your existing balance and let you pay it over a period of time. As long as you pay the payment agreement amount and your current bill, you'll be fine.

Making it Work

Once you've come up with a financial game plan, stick to it and keep making the payments you agreed to. Although it might be tempting to go on a spending binge because you're feeling deprived, remember that will only make things worse.