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Money Issues That Concern Married Couples

Marriage is an important step in anyone’s life and brings many challenges with it. One of those challenges is the management of your finances as a couple.

The money decisions that you make now as a couple can have a lasting impact on your financial future together. Careful planning of your finances can ensure that together, you achieve financial success.

1. Budgeting your money

► In general

When you were single, you managed your finances in a way that was comfortable for you and that you understood–no one had to approve or disapprove of your financial decisions.

Now that you are married, however, both you and your spouse have to agree on a system for budgeting your money and paying your bills.

► Discuss financial situations

You and your spouse must discuss your respective financial situations and expectations, and take stock of your individual assets (what you own) and liabilities (what you owe).

Revealing your financial situation is an important step when budgeting as a couple. If either of you has a financial problem, it is best to identify it now and begin solving it together.

This is the time to address questions such as what do each of you earn, and what additional sources of income do you have? What do you own? Will both of you work now that you are married?

Who will hold title to property acquired before and after the wedding? In addition, be sure to disclose all of your financial commitments. If you pay child support, let your partner know the amounts. If you have to repay student loans, discuss that as well.

► Discuss financial goals

After you discuss your financial situations, you should discuss your financial goals. You can start by each making a list of your short- and long-term financial goals.

Short-term goals are those that can take anywhere from three to five years (e.g., saving for a down payment on a home or a new car). Long-term goals are those that take more than five years to achieve (e.g., saving for a child’s college education or retirement).

When you have each determined your individual financial goals, you should review your goals together to achieve common objectives.

You can then focus your energy on those common objectives and strive to attain those goals (short- and long-term) together.

► Decide on the type of bank account(s) you will keep

Decide whether you and your spouse will have separate bank accounts or a joint account.

Advantages to consolidating your checking funds into one account include easier record-keeping, reduced maintenance fees, less paperwork when you apply for a loan, and simplified money management.

If you do choose to keep separate accounts, consider opening a joint checking account for household expenses.

Caution: When sharing a checking account, be sure to keep track of how much money is in the account at all times since both of you will be writing checks that draw from the same account.

► Prepare an annual budget

The first step in developing a financial future together as a couple is to prepare an annual budget.

The budget will be a detailed listing of all your income and expenses over the period of a year.

You may want to designate one spouse to be in charge of managing the budget, or you can take turns keeping records and paying bills.

Tip: Make sure that you develop a record-keeping system that both you and your spouse understand. Also, keep your records in a joint filing system so that you can easily locate important documents.

  • Begin with your sources of income–list salaries and wages, alimony and child support, interest, and any other form of income that you and your spouse may have.
  • List your expenses. It may be helpful to review several months’ worth of entries in each of your checkbooks to be sure that you include everything. Put all the expenses that are paid monthly into one category, and put all other expenses (every other month, quarterly, semiannually, annually) into another. Some common expenses are:
  • Savings
  • Rent or mortgage payments
  • Student loan payments
  • Groceries
  • Pet care
  • Utilities
  • Car payments
  • Credit card payments
  • Alimony/child support
  • Household items
  • Personal care/grooming
  • Major purchases
  • Insurance
  • Car repairs
  • Clothing
  • Tax payments
  • Medical expenses
  • Gifts
  • Automobile gas
  • Child day care
  • Entertainment/dining out
  • Estimate your expenses for each category. How much money do you spend on these items on a monthly basis and on an annual basis? Try to come up with a realistic amount for what you think you will spend in a year’s time. Add another category to the irregular expenses list, and call it Contingencies. This can be a catchall category for expenses that you might not anticipate or budget for. The amount to budget for contingencies should be about 5 percent of your total budget.
  • Add your sources of cash and uses of cash on an annual basis. Hopefully, you get a positive number, meaning that you are spending less than you are earning. If not, review your expense list to determine where you can cut your spending. Consider using computer spreadsheets or programs like Quicken for assistance.

► Create a cash flow system

After you have developed a budget, you should create a system for managing your monthly inflow and outflow of cash.

It is a good idea for both you and your spouse to become involved in this process–at least at first–so that both of you have a clear understanding of the costs of running the family and household.

Cash flow systems like the one described below are simple and painless to operate.

Once they are established, you will find that making financial decisions becomes much easier because you have done your homework.

  • Separate your regular monthly expenses from irregular expenses (every other month, quarterly, semiannually, annually) by using a different bank account for each. Otherwise, you may be tempted to use money that has been earmarked for something else. You should limit the number of checking accounts that you have in order to avoid confusion.
  • Each time you get paid, deposit some money into an account for irregular expenses. The amount of money you deposit should be equal to the total amount needed for the irregular expenses, divided by the number of paychecks you each receive annually. In so doing, you will have the money for the outlay when it arises. The rest of your pay should go into your checking account, to be used for regular monthly expenses and savings.
  • One variation to this system of cash flow management is to establish one or two additional bank accounts for one or both of you for personal spending money. Allocate the budgeted amount for personal expenses (e.g., lunches, haircuts, gifts) to this account. This way, you are free to spend the money in this account in any way you like without having to worry about meeting regular monthly expenses. However, all of these bank accounts may have fees.

2. Saving and investing your money

► In general

At some point in your married life, you will almost certainly encounter some large expenditures, such as a new home, your own business, or a college education for your children.

Chances are, you won’t be able to meet these expenditures from your current income. You and your spouse must discipline yourselves to set aside a portion of your current income for saving and investing your money to ensure its steady growth or, at the very least, protect it against loss.

► Save a percentage of your earnings

When figuring out your budget, savings should be considered one of your monthly expenses. Think of savings as a fixed payment (like a car payment) that must be made every month.

If you don’t and you wait until the end of the month to save whatever you have not spent, you’ll find that nothing ever seems to go into your savings account.

A good rule of thumb is for you and your spouse to save 4 to 9 percent of your combined gross earnings while you are in your 20s and then double that savings percentage as you reach your 30s and 40s.

In some cases, a dual-income couple may be able to live off one spouse’s salary and save the other salary.

Example(s): Mary and Richard, a married couple in their 20s, earn a combined annual gross income of $60,000. Together, Mary and Richard save 5 percent of their combined gross income each year, or $3,000.

Example(s): As another example, Christine and Tom, a married couple in their 30s, earn a combined annual gross income of $80,000. Together, Christine and Tom save 10 percent of their combined gross income each year, or $8,000.

► Build an emergency cash reserve

The savings that you accumulate can serve as an emergency cash reserve. Ideally, you should have in savings an amount that is comfortable for you to fall back on in case of an emergency, such as a job loss.

A common formula used for calculating a safe emergency fund amount is to multiply your total monthly expenses by 6. When determining how much cash should be in your emergency fund, a major factor is your comfort level.

If you and your spouse feel secure with your jobs and are confident that if you lost your current jobs you would be able to find a new one fairly quickly, an emergency fund of three times your monthly expenses should be sufficient.

However, if either of you has an unpredictable income, you may want to have an emergency fund that is equal to 12 times your monthly expenses.

Example(s): Christine and Tom, a married couple in their 30s, plan to build up an emergency cash reserve. Both Christine and Tom are attorneys and feel quite secure with their present jobs. Christine and Tom have monthly expenses of $3,000 and plan to build up an emergency cash reserve that is equal to 3 times their monthly expenses, or $9,000 ($3,000 x 3).

Example(s): As another example, Mary and Richard, a married couple in their 20s, plan to build up an emergency cash reserve. Both Mary and Richard are employed as freelance writers and feel that their incomes are at times unpredictable. Mary and Richard have monthly expenses of $1,500 and plan to build up an emergency cash reserve that is equal to 12 times their monthly expenses, or $18,000 ($1,500 x 12).

► Investing your money

When you have established an emergency cash reserve, you can begin to invest your money to target your financial goals.

There are three fundamental types of investments: cash and cash alternatives, bonds, and equities. Cash and cash alternatives are relatively low-risk investments that can be readily converted into currency, such as money market accounts.

Bonds, sometimes called debt instruments, are essentially IOUs; when you invest in a bond, you’re lending money to the bond’s issuer–usually a corporation or governmental body–which pays interest on that loan.

Because bonds make regular payments of interest, they are also known as income investments. Equities, or stocks, give you a share of ownership in a company.

You have the opportunity to share in the company’s profits and potential growth, which is why they’re often viewed as growth investments. However, equities involve greater risk than either cash or income investments.

With equities, there is no guarantee you will receive any income or that your shares will ever increase in value, and you can lose your entire investment.

In addition to these three basic types of investments–also known as asset classes–there are so-called alternative investments, such as real estate, commodities, and precious metals.

No matter what your investment goal, your overall objective is to maximize returns without taking on more risk than you can bear.

You’ll need to choose investments that are consistent with your financial goals and time horizon.

A financial professional can help you construct an investment portfolio that takes these factors into account.

Click here to get more information from our affiliate company PLJ Advisors.

3. Establishing good credit

► In general

Establishing good credit is an important step in the path towards a solid financial future. A good credit history can enable you to make credit purchases for items that you might not otherwise be able to afford.

Most creditors will require a good credit history before extending credit to you. If you do not have a credit history, it is important to establish one as soon as possible. If you have a poor credit history, you should take steps toward improving it right away.

► Individual or joint credit

Married couples can either apply for credit individually or jointly. One of the benefits of applying for joint credit is that both you and your spouse’s income, expenses, and financial stability are considered when a creditor evaluates your overall financial picture.

However, applying for separate credit has its advantages. If you and your spouse ever run into financial problems (e.g., illness or job layoff), separate credit allows one spouse to risk damaging his or her credit history while preserving the other spouse’s good credit.

In addition, separate credit can also protect you and your spouse from each other. If you and your spouse cosign a loan or apply for a credit card, you are both responsible for 100 percent repayment of the debt.

In other words, if your spouse does not pay his or her share, you can get stuck with paying the whole amount. On the other hand, if your spouse takes out a loan or applies for a credit card on his or her own, generally your spouse is solely responsible for the debt.

Tip: While the general rule is that spouses are not responsible for each other’s debts, there are exceptions.

Many states will hold both spouses responsible for a debt incurred by one spouse if the debt constituted a family expense (e.g., child care or groceries).

In addition, in some community property states, both spouses may be responsible for one spouse’s debts, since both spouses have equal rights to each other’s incomes.

You may want to discuss your state’s laws with an attorney if you live in a community property state.

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Spring Cleaning Your Finances

The arrival of spring often signifies a time of renewal, a reminder to dust off the cobwebs and get rid of the dirt and grime that have built up throughout the winter season. And while most spring cleaning projects are likely focused on your home, you could take this time to evaluate and clean up your personal finances as well.

Examine your budget..and stick with it

A budget is the centerpiece of any good personal financial plan. Start by identifying your income and expenses. Next, add them up and compare the two totals to make sure you are spending less than you earn. If you find that your expenses outweigh your income, you’ll need to make some adjustments to your budget (e.g., reduce discretionary spending).

Keep in mind that in order for your budget to work, you’ll need to stick with it. And while straying from your budget from time to time is to be expected, there are some ways to help make working within your budget a bit easier:

  • Make budgeting a part of your daily routine
  • Build occasional rewards into your budget
  • Evaluate your budget regularly and make changes if necessary
  • Use budgeting software/smartphone applications

Evaluate your financial goals

Spring is also a good time to evaluate your financial goals. Take a look at the financial goals you’ve previously set for yourself — both short and long term. Perhaps you wanted to increase your cash reserve or invest more money toward your retirement. Did you accomplish any of your goals? If so, do you have any new goals you now want to pursue? Finally, have your personal or financial circumstances changed recently (e.g., marriage, a child, a job promotion)? If so, would any of these events warrant a reprioritization of some of your existing financial goals?

Review your investments

Now may be a good time to review your investment portfolio to ensure that it is still on target to help you achieve your financial goals. To determine whether your investments are still suitable, you might ask yourself the following questions:

  • Has my investment time horizon recently changed?
  • Has my tolerance for risk changed?
  • Do I have an increased need for liquidity in my investments?
  • Does any investment now represent too large (or too small) a part of my portfolio?

All investing involves risk, including the possible loss of principal, and there can be no assurance that any investment strategy will be successful.

Try to pay off any accumulated debt

When it comes to personal finances, reducing debt should always be a priority. Whether you have debt from student loans, a mortgage, or credit cards, have a plan in place to pay down your debt load as quickly as possible. The following tips could help you manage your debt:

  • Keep track of your credit card balances and be aware of interest rates and hidden fees
  • Manage your payments so that you avoid late fees
  • Optimize your repayments by paying off high-interest debt first
  • Avoid charging more than you can pay off at the end of each billing cycle

Take a look at your credit history

Having good credit is an important part of any sound financial plan, and now is a good time to check your credit history. Review your credit report and check for any inaccuracies. You’ll also want to find out whether you need to take steps to improve your credit history. To establish a good track record with creditors, make sure that you always make your monthly bill payments on time. In addition, you should try to avoid having too many credit inquiries on your report (these are made every time you apply for new credit). You’re entitled to a free copy of your credit report once a year from each of the three major credit reporting agencies. Visit for more information.

Assess tax planning opportunities

The return of the spring season also means that we are approaching the end of tax season. Now is also a good time to assess any tax planning opportunities for the coming year. You can use last year’s tax return as a basis, then make any anticipated adjustments to your income and deductions for the coming year.

Be sure to check your withholding — especially if you owed taxes when you filed your most recent tax return or you were due a large refund. If necessary, adjust the amount of federal or state income tax withheld from your paycheck by filing a new Form W-4 with your employer.


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Credit Card Junkies: One Secret The Joneses DON’T Want You To Know

(And Why You DON’T Want to Keep Up With Them)

Who Are The Joneses?

The Joneses might be your neighbors, a cousin or your work buddy. They could live next door or be Facebook friends. Whoever they are, we all know them. They’re the people who seem to have it easy. Every year they have a new car. They remodel their kitchen without batting an eye. Their kids are in fancy private schools. And they jet off to Aspen or Paris without a moment’s hesitation.

Somehow The Joneses can afford a lifestyle that’s just out of reach for the rest of us. How do they do it? They don’t have a better job or trust fund. They work like the rest of us – but they still manage to stay two steps ahead.

Their Secret to “Wealth”

As much as we try not to compare ourselves to our peers, it’s tough.

But what if you knew that everything the Joneses do is paid for with borrowed money?

Would you run out and get all the credit cards you can and drive up your debt so you can roll around in a shiny new sports car? Or would you think differently about The Jones’ fabulous life? Suddenly, it doesn’t seem so great.

The Joneses are not alone. Many Americans subsidize their lifestyle with borrowed money.

America Is Hooked On Credit

A recent report by the Federal Reserve shows that consumer credit is on the rise.

► During the fourth quarter of 2016, it rose at a seasonally adjusted annual rate of 6 percent.

► Revolving credit and non-revolving credit both increased, too – at an annual rate of 6 ¾ percent and 5 ¾ percent, respectively.

► Finally, consumer credit inched up at an annual rate of 4.5 percent as of December.1

Americans owe a staggering $995.5 billion dollars in outstanding, revolving credit as of December 2016. That’s $149.8 billion dollars more than they owed in 2012.2

This upward trend of paying on borrowed money is worrisome when it’s contrasted with how much people have saved for retirement.

In 2013, the median retirement savings of families aged 38-43 was just a little over $4000. A report by the Economic Policy Institute reveals a dismal future for retirement in the U.S.

“Nearly half of families have no retirement account savings at all. That makes median (50th percentile) values low for all age groups, ranging from $480 for families in their mid-30s to $17,000 for families approaching retirement in 2013.” –Economic Policy Institute, “Retirement in America”

Living on Borrowed Money Can Feel Like a Constant Stomach Ache

For many people, living off credit is an addiction. Credit abusers often feel shame because they hide their debt from their spouses and struggle to keep up with all of the mounting bills.

Others might be in denial – believing that it’s okay to live off credit cards. Perhaps their friends and family also rely on credit cards to pay for everything, so this behavior seems normal.

But it’s definitely not normal. Living off credit can lead to feelings of anxiety and guilt – not to mention a depleted bank account, relationship problems and bad habits that can last a lifetime.

If you think you might be someone teetering on the edge of abuse, check out this list of “8 Signs That You Abuse Credit Cards.” If you relate to any of these, it’s possible you need to change your behavior.

8 Signs That You Abuse Credit Cards:

  1. You don’t know your balance. You just pay the minimum monthly payment each month.
  2. This is your only source of discretionary income.
  3. You regularly apply for new cards.
  4. You pay your credit card bills using high-interest loans or cash advances from other credit cards.
  5. You don’t save money; instead you believe that credit cards are the solution to all financial problems.
  6. You avoid thinking about how much you owe, because if you did you would feel guilty.
  7. Your credit cards are all maxed out.
  8. You hide your credit card debt from your spouse and family.

If this is you, then the first step is to get out of denial. Admit you have a problem and then face it head on. You will feel so much better once you take control.

Going From a Spender to a Saver Right Now

First, figure out how much you owe on each card. Then make a plan to pay them all off – as soon as you destroy these cards.

Yes, destroy them.

You don’t want to be tempted by just one little brunch date or manicure. From this moment on, you’re a saver! So, you have to act like it.

It’s going to take time to refrain from buying new shoes the moment you want them, but if you keep exercising your self-control – it will grow into a strong muscle that can power through even the best deals and most amazing shoes you’ve ever seen.

Need tips on how to develop self-control and be money confident? Subscribe and listen to Crystal’s podcast!


We’re not advocating to live like a monk. But, you can’t enjoy life if you’re worried about how much you owe – and how little you have in the bank.

If you’re an impulse spender, then you might want to figure out what’s triggering you. Do you shop when you’re bored? Online? With friends? Whatever it is, you have to make sure you have an escape plan when the shopping urge strikes.

The Bottom Line

Escaping the credit card trap is tricky, but not impossible. People do it every single day, and so can you.

Remember, the moment you feel bad about your last-season sneakers as Mrs. Jones strolls into your workout class with really cute, new Nikes… imagine your bank account growing. Now, imagine yourself at 56, about to retire, with a wonderful nest egg that will allow you to have the lifestyle you’re used to. Pretty nice, right? Now imagine Mrs. Jones’ nest, there’s no egg in it – just a lot of credit card bills and old sneakers. Don’t be like Mrs. Jones.

It’s not too late to change your habits. Check out the light version of our Money Diary. It’s an amazing and simple tool to help you track your spending and income, so you can take control of your finances today! Ready to begin? It’s so easy – you’ll wonder why you didn’t start sooner!



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How to Save and Plan in Your 20s, 30s, 40s and 50s

Your Quick Guide to Getting Money Wise At Every Age

Each period in life comes with its own, unique set of priorities, challenges and benefits. When you’re young, you don’t have much money to save – but you do have time. The reverse is true as you get older: you’re making more money, but you have fewer years to build up your nest egg.

The key is to balance your needs, throughout your life, with healthy savings habits. Let’s take a look at the common issues we face in each decade and how we can handle those things, while still strategically saving for our future.


As you transition from high school and college into the workforce, the top-of-mind worries tend to be finding an apartment, a reliable car and a fun place to meet people on the weekends. It’s usually not retirement. Thinking of retiring – just as you start working – is like planning your summer wardrobe in the dead of winter… it’s not going to happen.

But, there are two compelling words that might inspire you to start saving now: compound interest. If you’re not familiar with this concept, then get ready to be impressed.

Here’s how it works: If you save $3000 in 2017 and earn 3 percent interest, you’ll have $3090.00. If that money continues to earn interest at that rate, in 2018, you will earn interest on your original investment — $3000 – plus on your extra $90. This keeps happening over and over, year after year. You are earning interest on interest on interest.
If you add $3000 to this account each year – with a steady rate of 3 percent, you will have $235,989.89 in 40 years. That’s almost $116,000 in interest.

So, if you haven’t begun saving yet, start now. For people early in their careers and not making much money, you can start small. There are two benefits of this:

  1. You’re still saving – and every little bit counts!
  2. By committing to saving and your financial future, you’re creating a very valuable habit.


By the time many people reach their 30s, their big priority is buying a house. According to Zillow, the average age of first-time homebuyers is 33.1

Because houses require large down payments and come with a ton of smaller – but multiple – little expenses (fix the leaky sink, buy homeowner’s insurance, replace the roof), most people at this age are not putting retirement at the top of their list of stuff to spend money on.

Couple this with having a family, paying for child care and health insurance – and saving for retirement suddenly sounds like a luxury expense.

Hope is not lost. You can pay your bills and still think about the future. It just might take a little discipline and planning. Here are three things you should do in your 30s.

  1. First, take advantage of employer-sponsored retirement plans, like 401ks. When you use pre-tax money to fund your account, you get to make interest off that money – so it’s kind of like turbo-charging your savings. Sure, you’ll have to pay taxes on your 401k when you withdraw money from it (after you turn 59 ½), but you don’t have to pay back the money you made off of those taxes.
  1. Second, now’s the time to pay off debt. Get rid of high-interest loans and credit card bills first. Next, pay off student loans and any low-interest loans. By getting rid of debt, you’ll free up money you can use to invest in your 401k or IRA.
  1. Finally, pay yourself first. Before you fund your kids’ college accounts, splurge on a vacation or buy a new car – set aside money for retirement. Your future self will thank you.


With about two decades of work experience – and hopefully some retirement savings in the bank, you are probably making more money now than ever before. This is a great time to set some retirement goals. You might want to create an age target and set up a strategy to make sure you’re on course to meet that goal.

If you’re lucky enough to have disposable income, now’s the time to dispose of it in a 401k or IRA account.

If you make enough money to max out your 401k for the year – which is $18,0002, you can invest additional money in a tax deductible or Roth IRA.

  • Set up a time to talk with a professional. Make sure you choose one who is certified, a fiduciary and comes with high recommendations.

Explain your goals and make sure he or she is willing to take an active role in achieving those goals. What that means is you probably don’t want someone who forgets about you until you call them five years later.


Hoorah! You are at the home stretch. This can be an exciting – or very scary – time, depending on how you have managed your finances. If you haven’t done a great job so far, don’t worry – you still have time to avert disaster.

If you have paid off your house, try not to accrue any more debt. Don’t be tempted by a second mortgage to help you finance a kitchen remodel. Your house should be sacred as you near retirement. A paid-off house is doubly blessed as you don’t have to worry about big monthly mortgage payments – or where you’re going to live should you run low on money.

Clearly, you want to sock away as much as you can – so keep your eye on the prize, and cut out any unnecessary spending.

For those who have done a good job saving, be sure to meet with a professional at least once a year. If you need help or are looking for a second opinion, we can help with that. Why? We believe that as you near retirement, you should adjust your savings to decrease your exposure to the market.

When you’re in your 20s you can afford taking risks because you have time to recover. In your 50s, however, we believe that you should protect your principal and be more conservative with your money.

Now that you have a guide for handling your money at every age, pass it on. Share this information with your friends, children, parents and spouses. Getting money confident begins with knowledge and ends with good habits that put ideas into action.




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Surviving Financially When You’re Unemployed

What is it?

When you lose your job, you may have to put yourself on a financial diet. Just as losing weight is simple if you eat less (and exercise more), staying afloat financially is simple if you spend less. Is this process going to be easy? No, of course not. But it can be done with a little self-discipline, some creativity, and a lot of planning.

Plan for a six-month period of unemployment

It’s hard to know how long you’ll be unemployed. You may find a new job within a matter of weeks, or it may take you months. However, it’s best to plan for a worst-case scenario, probably six months. Most likely, you’ll find a job sooner, and you can throw the rest of your plan in the trash. But, if you don’t find a job quickly, at least you’ll be prepared.

Follow the plan

When you’ve come up with a financial plan, stick to it. Like any diet, you’ll be tempted to cheat by spending a little more money than you should. You may even find that as time goes by, you want to change your plan a bit. That’s OK. Your plan is designed to be flexible so that you don’t feel too burdened by something that seems unworkable.

Adjust your expectations

No, finding a new job is not going to be easy

First, despite the number of appealing job ads you see in the Sunday paper, finding a new job is not going to be easy. Even if you’re one of the lucky few that’s working in an occupation that’s in high demand, finding a new job is probably going to take at least a few weeks and maybe months. Your job search may look something like this:

  • Week One: Send out ten resumes, and wait for the phone to ring.
  • Week Two: Send out ten more resumes, and wait some more.
  • Week Three: Send out five resumes for jobs you really want and five for jobs that you really don’t want. The phone rings. It’s your mother.
  • Week Four: The phone rings. Then it rings again. You line up two job interviews. You send out three more resumes.
  • Week Five: You have two interviews, and send out five more resumes. You’re called for a second interview at one of the jobs.
  • Week Six: Good news! You’re hired! Bad news: You can’t start for two more weeks.

As you can see, even a successful job search can take a while, even if you’re a good candidate in a good job market. Prepare yourself for this by drawing up a financial plan as soon as you lose your job.

Expect that life is going to change

When you lose your job, you probably won’t be able to live the same way you lived when you had a job. If you try to live the same way, there’s a good chance you won’t survive financially. If you’re unemployed for only a few weeks, your life might not change radically. Perhaps you’ll only need to spend a little less on groceries, go out to eat once every two weeks instead of once a week, and then dip into your savings account. But if you’re unemployed for months, or if your basic living expenses are high, you’re going to have to take a more radical approach to survive. You may have to sell your house, your car, or take a temporary job. Prepare yourself mentally for this.

Map out your priorities

How desperate are you?

Desperation can trick you. Things that you once said that you’d never do, seem more and more appealing as time passes and you can’t find a new job. When you started your job search, maybe you said “I’ll do anything to survive, but I won’t sell my Jeep!” Four months late, you’re saying, “OK, maybe the Jeep has to go, but I’ll never disconnect my cable.” Hopefully, you’ll never reach the point where you say, “I’ll declare bankruptcy, but only Chapter 13, not Chapter 7!” After all, you do have some pride, don’t you? What are the things you will and won’t do, will or won’t sell to survive financially? At this point, do yourself a favor and map them out.

Remember, diets (even financial ones) don’t last forever

Keep in mind as you plan for unemployment that even though you’re on a financial diet, no diet lasts forever. At some point, you’ll find another job and the crisis will pass. Therefore, you want to be especially careful that the decisions you make now aren’t shortsighted. Do what you can to survive, but only do what you really have to.

Example(s): When Jeff was feeling especially desperate one day, he sold his lawn mower at a garage sale for $75. Two weeks later, he landed a job at a software company, and his lawn had grown six inches. Jeff was forced to spend $350 for a new mower.

Draft a survival budget

The next step is to draft a survival budget. If you currently have a budget, use that as a guide. If you don’t, you’ll have to start from scratch by listing all your income and expenses. A survival budget is a bare-bones version of a regular budget. What you want to end up with is an idea of what income you need to actually survive. Start by listing your expenses and your post-employment income. Remember to include only expenses that are necessary; eliminate any items that are luxuries or that you could reasonably do without.

Find ways to increase your income

There are many ways to increase your income while you look for a new job, some of which you should look into immediately, and others only when you are truly desperate.

Unemployment insurance

One of the first places you should look for income when you lose your job is your state’s employment office. However, you can only receive unemployment benefits if you meet certain eligibility criteria. Mainly, you must be involuntarily unemployed. This means that if you’ve quit your job, you have no chance of receiving unemployment benefits, but if you’ve been laid off or fired (but not for misconduct), you should definitely check into it. Benefits and regulations vary from state to state, so it’s hard to say how much you’ll get. But if your application is approved, you should begin receiving benefits quickly, often within a week or two.

Severance pay

You may be eligible for severance pay if you are laid off. How much you receive will depend upon your employer’s policy. You may have the option of receiving a lump-sum payment or a continuation of salary. If you take a lump-sum payment, you’ll have immediate control over your money, but you may lose your employee benefits. If you take a continuation of salary, you may keep your benefits, but you’ll have to trust the company that laid you off in the first place to stay financially sound.


If you’ve planned ahead, you may have an emergency fund set up that’s equal to three to six months of living expenses from which you can borrow when you need to supplement your income. This is a great source of income … if you have it. Many people don’t, and are surprised to see how fast a savings account can be depleted when it’s used as a source of funds for everyday expenses.

Credit insurance

You probably don’t have credit insurance that will make your bill payments when you’re unemployed. However, if you have any doubt, call your mortgage company, or credit card companies to find out or check your billing statements. Perhaps you inadvertently signed up for such protection, which adds a few dollars to your payment every month. However, you may have to wait for a while before receiving benefits.

Part-time or temporary job

If you get a little more desperate, you should think about taking a part-time or temporary job to supplement your income. This may be a good idea for two reasons. First, you’ll feel less stress if you know that you have at least some regular income coming in. Second, you may even be able to parlay a part-time or temporary job into a full-time job, or gain experience that will help you in your job search. Third, you’ll be able to schedule interviews relatively easily, if you can decide where or when you want to work (as you can with many temporary assignments). Even if you take a job that you feel doesn’t have career potential, you’ll feel better just doing something besides sitting around the house worrying.

Have a yard sale

Depending upon what you have to sell, having a yard sale can be quite lucrative. If you look around your house, you’ll be surprised at how much you own that you really don’t need. Make a list of things you want to get rid of, and list them in order of priority. If you’re really desperate or if you don’t care about an item, price it accordingly. If you don’t want to sell it unless you get a good price, keep that in mind as well. Also consider consigning items at a shop if you have specific things to sell.

Sell your house, or rent it

As a last-ditch attempt to remain solvent, selling your house can be advantageous if you can raise a lot of cash this way and if you want to reduce your monthly cash outlay over the long-term. It’s not a good short-term way to raise cash because it will take time to implement, and it has long-term consequences. After you accept an offer on your house, you could have trouble if you change your mind, and the impact on your family will be far-reaching. If you want to temporarily reduce what you pay for housing, however, you may want to consider moving to an apartment (or cheaper housing) and renting out your home for a year or two.

However, any decisions you make in this area should be made carefully, and only after considering the true cost of your decision and how much you can actually get out of the deal.

Withdraw money from your tax-deferred retirement account

Withdrawing money from your tax-deferred retirement account (e.g., an IRA or employer-sponsored retirement plan) is an option you should consider only as a last resort to avoid bankruptcy. In general, any money you withdraw from a tax-deferred retirement account will be taxed as ordinary income for the year in which you make the withdrawal. In addition, you may have to pay a 10 percent penalty tax for early withdrawal if you’re under age 591/2. The IRS allows exceptions to the penalty tax under certain conditions, however.

Tip: If you are considering taking funds from your IRA or retirement plan, you should consult a tax advisor regarding the specific tax treatment of your withdrawal, because not all of it will necessarily be taxable. For example, if you have ever made nondeductible contributions to your traditional IRA or after-tax contributions to your employer’s plan, a portion of your withdrawal may not be subject to tax. Also, qualifying withdrawals from a Roth IRA are totally tax free, and even nonqualifying withdrawals may not be fully taxable (since Roth IRAs are funded only with after-tax contributions).

Borrow from the cash value of your life insurance policy

If you have a life insurance policy with cash value, consider borrowing the cash reserves. You’ll have to repay the money, but not right away.

Borrow from relatives

Borrowing from relatives can be difficult. Not only will you have to put aside your pride, but you’ll also have to contend with the consequences. Your relatives may be generous, but there’s a chance that their generosity will backfire. What if you can’t pay the money back? What if you eat out one night? Will they secretly (or vocally) hold this against you? If you do borrow from a relative, clearly outline the terms of the loan in writing, if necessary. That way, you’ll reduce the chance for a future conflict.

Reduce expenses

Increase deductibles on auto insurance

Check with your insurance company to find out how much you could save per month on your auto insurance premium if you increased your deductible. However, remember that if you get into an accident, you’ll have to pay the deductible out of pocket. Will you be able to come up with a large amount of cash while you’re unemployed? Balance the risk with the benefits.

Sell your car

While many people consider a car to be a necessity, you may be able to dramatically reduce your monthly expenses by selling yours–they are expensive to drive and maintain. Not only do you have to pay for gas and upkeep, but in many cases, you also have to pay insurance premiums and monthly car payments. This can add up to several hundred dollars per month–money you could really use when you’re unemployed. Keep in mind, however, that if you have a loan on your car, you might owe more than your car is worth; if you sell your car for less than the loan balance, you’ll still have to make payments until the balance is paid off (or take out another loan to pay off the car loan balance). Also, if you get another job, you may need to buy another car, and many lenders require a certain length of employment before they give you a loan. Investigate your options thoroughly before you sell your car.

Selling your car may also be a good way to raise a large amount of cash quickly. This will depend, of course, on whether you own your car, whether you have a loan for it, and what your car is worth. Again, this is a decision to make carefully. If you have a loan, call your bank to find out the procedure to follow, because until your bank releases the title, you don’t really own the car. They can also tell you the book value of your car and your loan balance. If you own your car outright, research its value at the library or on the Internet, and decide what price to charge.

Negotiate with your creditors

If you find that you’re having trouble paying all your bills, seriously consider negotiating with your creditors. Assuming that you have good credit, you may find it relatively easy to reduce the interest rates on your credit cards, skip a payment or two on your car loan, or reduce your monthly payments temporarily. To do this, you’ll have to put aside your pride and admit that you’re having financial difficulties. You’ll be in a much better negotiating position, however, if you call your creditors before you get into financial trouble. Some creditors will turn you down, but most will negotiate with you. If you wait until you’ve already missed more than one payment and the creditors are calling you, you’ll have more trouble making your case. If you need help negotiating with your creditors or managing your debt, you may want to call a nonprofit credit counseling organization, such as the Consumer Credit Counseling Service (CCCS). For further information on CCCS, call (800) 388-CCCS.

Caution: If your creditor agrees to let you skip payments or pay reduced amounts, honor the terms of your agreement, and keep in close contact with your creditor’s representative. Otherwise, your good credit may be ruined.

Discontinue discretionary expenses

You probably pay for a lot of things you don’t really need. For instance, think about canceling magazine subscriptions, extra phone services, credit cards you don’t use that have an annual fee, health club memberships (if possible without incurring a large cancellation fee), auto club memberships, cable television, and Internet service (although this can help you find a job). You may even save a few dollars a month by switching banks if you currently pay monthly checking fees. Every little bit helps.

Tip: If you’re billed annually for some of these things, you won’t save any money unless you cancel them at renewal because you won’t ordinarily get a refund.

Limit long-distance calls

If your long-distance bills are high, put yourself on a phone budget. Vow to spend no more than a certain amount (say $25 a month) on long-distance. To keep track of your calls, keep a notebook next to your phone so that you can easily see when you’ve reached your limit.

Strategies to consider if you have more time to prepare

Often you lose your job with little warning. However, if you’re being laid off or plan to quit your job, you may have time to save money for unemployment by using the following strategies.

Establish a home equity line of credit

If you have enough time, consider establishing a home equity line of credit, if you have enough equity in your house (20 percent is often the minimum), and if you can find a bank that will loan you money without charging you closing costs. With a home equity line of credit, you’ll pay interest only on the portion you use. However, the bank may charge you an annual fee or require that you take a certain draw on the line up front. You may even be able to use the line to pay off credit cards or loans that carry a higher interest rate, and consolidate your debt. You’ll still have to make a monthly payment, however, so make sure you’ll be able to afford it before you put your house on the line. In addition, beware when lenders claim that your home equity line of credit will be tax deductible. Although this may be true in many cases, you should consult your tax advisor to find out whether it will be true in your case.

Caution: Use caution when using your house as a debt management tool. If you can’t pay your loan back, you may lose your house.

Reduce contributions to retirement or education funds

Once you know you are going to lose your job, stop contributing to any savings plans that you’ll have trouble accessing, or that aren’t necessary. These include retirement funds, education funds, and Christmas club accounts.

Decrease your withholding

Consider increasing your withholding allowances to reduce the amount that is taken out of your paycheck. Deposit this extra money in a savings account. Of course, be careful that you don’t claim more allowances than you are entitled to. When you get a new job, you should look at your tax liability for the year. It’s possible at that time that you’ll have to increase your withholding to make up the difference.

Plan a financial strategy

Once you’ve mapped out your priorities and drafted a bare-bones budget, you’re ready to come up with your own six-month financial strategy. After you’ve formulated your own strategy, post it somewhere (maybe on the refrigerator) where you can use it everyday to chart your progress.