How to Adjust Your Budget After Job Loss

Upset male office worker holding box with things and leaving office building

After a job loss, surviving financially can be a challenge, and planning for the future can be a major source of stress. Under those conditions, creating a budget may be the last thing on your mind. But when money's a major source of anxiety, budgeting is key.

Your budget will be a plan for how you'll pay your bills and avoid debt while you financially survive this period of unemployment. In addition, try to reduce the stress you feel about money to focus your energy on getting back on your feet. Here's how to budget after a job loss in six steps.

1. File For Unemployment Benefits

First thing's first: File for unemployment as soon as possible after you lose your job. Unemployment insurance is a cash benefit designed to replace a portion of your income. If you qualify, it can provide you with a crucial source of income to afford housing, bills and other necessities while you look for employment.

To receive unemployment, you'll need to meet your state's eligibility requirements and file a claim online. Visit the U.S. Department of Labor's resource to find contact information for your state's unemployment office, plus instructions on how to file a claim. Be sure that the information you provide is accurate and up to date to avoid processing delays for your claim.

In addition to unemployment benefits, research other assistance that may be available in your state:

  • The Federal Supplemental Nutrition Assistance Program (SNAP) helps low-income households purchase healthy groceries. You can also dial 211 for help meeting your family's nutrition needs, or search for nearby soup kitchens and food pantries.
  • Temporary Assistance for Needy Families (TANF) provides temporary financial assistance to unemployed or underemployed people who have children, are pregnant or are under 18 and head of their household. Use this state finder tool on the U.S. Department of Health and Human Services website to locate your state's TANF office.
  • Find health coverage. If you have health insurance through your previous employer, you may be able to continue your coverage through COBRA. You can also enroll through the health insurance marketplace in your state. When you apply for marketplace insurance, you'll automatically be assessed for Medicaid and the Children's Health Insurance Program (CHIP). These federal programs provide health insurance to low income individuals or households.
  • Look for other local assistance programs. Look into sources of free financial assistance that may be able to get you help. Also, some religious organizations, such as the Salvation Army and Catholic Charities USA, help those facing hard financial times through emergency assistance with housing, health care, bills and food.

2. Calculate Your Basic Living Expenses

When you're working with limited cash, it's important to get clear on exactly what you need to pay each month to get by. This will be just the essentials: basic housing, essential transportation, non-negotiable bills, groceries, your phone bill and so on.

Start by going through your transaction history for the past couple of months. Highlight or jot down only your basic expenses. Be strict about what you include; streaming subscriptions, non-essential food and retail purchases are all examples of things you would not include in this list. Be sure that you do include any variable bills that are coming up, such as your car insurance payment.

Make sure you list out minimum debt payments in your mandatory expenses. To avoid damage to your credit, don't stop making payments when you lose your job. To make debt repayment easier to manage, look for ways you can reduce or defer your monthly debt payments. Your lender may offer a credit hardship program to ease the burden during times of financial difficulty. The key is to reach out as early as possible to ask about options.

3. Cut Back Everywhere You Can

With a clear picture of what's essential and what's not, you can start reducing your monthly expenses even further.

Some of the things you can cut back on right away include a gym membership, salon appointments, takeout and restaurant meals, luxury goods and subscriptions. Others may be less clear. For example, if you're currently bundling internet and cable, you may be unsure of whether to keep your package. Because cable is expensive, you may think you need to cancel it. On the other hand, you might choose to keep Wi-Fi in order to research jobs or apply for benefits. For the rest of your bills, you can try negotiating your monthly payments.

Another way to cut back is by saving on groceries. You may be able to reduce the amount you spend at the grocery store by meal planning with recipes that use affordable ingredients, such as rice, pasta, frozen vegetables, canned goods and poultry. You can also try completing a no-spend challenge in which you create meals out of forgotten items in your pantry, fridge and freezer.

4. Create a Bare-Bones Budget

Once you've gotten clear on exactly what you'll need to pay for to survive while you're unemployed, create a plan. You'll create a budget called a bare-bones budget: an emergency spending plan designed to cover only the essentials.

First, write down any sources of income you have. If you have an emergency fund, calculate how much you can allocate each month, being as conservative as possible to avoid depleting your funds. Write down any benefits you're receiving or any help you're receiving from friends or family.

Next, write down all of your bills and minimum debt payments. It can be helpful to write this information on a calendar so you can see when expenses will come out of your account. You can also consider a budgeting app to keep track of what money you have in your account and what expenses will come out when. That can help you avoid overdrawing your account.

5. Look for Sources of Temporary Income

Finding a source of income can help you afford essentials while you figure out a long-term plan. Here are some ideas for making quick cash.

Find a Gig

Gig work can be lucrative. For example, driving for a ride-hailing app, delivering food, walking dogs, caring for children or tutoring can all be ways to bring in a steady stream of income, depending on your location and skillset.

Other online freelance gigs in high-demand niches can be high-paying. But these types of gigs can also be hard to break into initially, unless you already possess substantial experience in that field. For example, if you're a journalist or a web designer and you're laid off, you may be able to find freelance work in those fields while you look for something steady.

Sell Things You Don't Need

Selling furniture, clothing or other unwanted items online may be able to help you bring in some much-needed quick cash, which can help you pay bills or buy groceries. Look into online marketplaces such as Facebook Marketplace.

Look for Temp Work

Lastly, consider temp work agencies, which are employment agencies that staff positions on a temporary basis. They typically match workers with urgent openings in a variety of fields, such as administrative assisting or manufacturing. This type of work doesn't typically provide the same benefits and security as permanent employment, but it can be a good source of temporary income. And, sometimes, temporary work can be a bridge to full-time employment for the same company.

6. Keep Saving, if Possible

If you suddenly lose your income, saving for the future may seem way out of scope. But if it's at all possible, try to set aside a portion of any income you receive into a savings account. Even a small amount—$10 a week, for example—is a step toward building greater stability.

Whether or not you can afford to keep saving, stick with this rule: Don't tap into your retirement savings early in an emergency. Early withdrawal penalties can be steep, and that money should remain there for you, long-term, to help you reach retirement.

The Bottom Line

When you lose your job, maintaining a sense of control over your finances can be challenging and stressful. Reaching out to resources in your state can help you find some relief, and getting clear on exactly how you'll allocate any income you have can help you feel more in control.

Ideally, you'll want to avoid taking on debt in an emergency. Doing so could mean incurring high-interest debt that will cost you more money over time. You'll typically first want to turn to your emergency fund and any streams of income you have to cover expenses. If you do need to borrow money in an emergency, learn about more affordable borrowing options, such as small personal loans. But, again, be cautious here: Taking on an emergency loan with high fees and interest could do more harm than good.