Advice when joblessness hits home

Michelle Singletary
Columnist May 28, 2011

While conducting a workshop this spring, I asked how many of the participants had lost a job or knew someone who was unemployed.

Just about everyone raised a hand.

Michelle Singletary writes the nationally syndicated personal finance column, “The Color of Money.” View Archive

So many families have to figure out how to deal with much less. And in a recent online discussion, several readers asked for advice about their jobless situation.

One woman wrote:

“My husband lost his job, and we immediately went into expense-cutting mode, cutting cable, eating almost exclusively out of our fridge/cupboards, etc. We have our emergency fund, which will cover six to 12 months, as you advise. But how do I get past my frustration that we weren’t cutting costs before? We haven’t told our 4-year-old anything. At what point should we try to explain the situation to her?”

You can’t beat yourself up for living well when you had the resources. One of the hardest things to do in this society is to save adequately when your income is steady and you aren’t in a financial bind. Many people are living frugally now because they have to. But there was a time not all that long ago when frugality wasn’t forced. It was not the “in” thing. Don’t minimize the fact that you managed your money well enough to save a significant amount of your income.

As for your little girl, in very basic terms, explain that her daddy is looking for a new job and so, as a family, you can’t spend as much as you might have in the past. I have three children and even when they were young, they could handle a firm, loving “no, you can’t have this because it’s not in our budget.”

Don’t give her too many details because you don’t want to scare her. Still, this is a good, although unfortunate, life lesson. She will be watching how you and your husband handle the situation. If you manage this well, your daughter will learn that it doesn’t have to be too traumatic to live with less when money becomes tight.

Another reader wrote:

“We are in our mid-40s with young kids and my husband was laid off several months ago for the second time in five years. I work full time, and we can probably survive the layoff for another eight months or so by dipping into some savings. Having been through this before, it may take another several months to a year or maybe longer for my husband to find a similar-paying job. Our current mortgage payment is slightly more than the 30 percent of net income threshold when we both worked. We have $100,000 equity in our home despite the fact that it is worth less than what we paid in 2005. I am thinking that maybe we should sell our home and either rent or buy another home with a mortgage that can be covered with just one income from my fairly secure job, which will free up money and allow us to survive layoffs and save better over the next 15 years for retirement and college. Does it make sense to sell our home to ensure long-term stability?”

It makes perfect sense — maybe.

Talk to a real estate agent to be sure you still have as much equity in your home as you think. Talk to a lender to see whether, given your family’s recent financial situation, you would qualify for a good-priced mortgage even on a lower-priced home.

Check out the apartment and rental homes in your area to see how much you would pay in rent. Depending on where you want to reside and the size of your family, you might find that you have to spend as much on rent as you do for your mortgage. Just carefully examine all the choices before you make any decision.

Here’s another:

“I returned to work after having been unemployed for nine months. I took a job that paid slightly less than the job I had lost. I am caught up on my bills but have done nothing to replace the $10,000 in savings I spent while unemployed. In this economy, how do I get back to a point where I once again have a nest egg for emergencies?”

It doesn’t really matter the state of the economy. Whether it is good times or bad, you have to try to save something. So if you’ve depleted your savings because of a job loss, do what you did before.

Be patient, disciplined and systematic about saving. Plan, as best you can, for the worst, and hope for the best.

Readers can write to Michelle Singletary c/o The Washington Post, 1150 15th St., N.W., Washington, D.C. 20071. Or e-mail: singletarym@washpost.com. Personal responses may not be possible. Please also note comments or questions may be used in a future column, with the writer’s name, unless a specific request to do otherwise is indicated.

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