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Laid off? Plan how to survive on less

March 06, 2009|By LYNN LITTLE

As a growing number of businesses are forced to lay off employees, more and more Americans are faced with the reality of having to get by on less, sometimes a lot less. Fortunately, the financial burden can be eased.

The prospect of living on a reduced income can be traumatic. Pretending that nothing has changed won't help. You have to find ways to reduce your spending until you can increase your income.

First step: Figure out your income and expenses. Write down the amount of money you had coming in monthly before you experienced your job loss. Then list your currently monthly income. Include paychecks, unemployment compensation, child support, alimony or government assistance.

Once you've figured your present income, list where your money goes. Use past spending records, including your checkbook register, online banking statements and expense receipts, to estimate your monthly and occasional expenses before your income was reduced.

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If your income and expense statement indicates that your reduced income is equal to or greater than your expenses, you are in good shape. If your expenses are greater than your income, look for some ways to gain control of your financial situation.

Identify places where you can cut back. You can't reduce your rent or mortgage or your car payment, but you might be able to reduce spending on utilities such as electricity or the phone. And, if you have to, you should be able to reduce expenses for food, gasoline, clothing, recreation, charitable contributions, gifts, alcohol and tobacco.

As you contemplate changes in spending, you will need to make consider the following:

o Discuss the priority needs of all family members

o Determine the most and least important household expenses and reduce accordingly.

o Avoid the use of credit except for emergencies.

o Set priorities for paying your bills.

o Prepare and follow a written spending plan in which you have set limits for each budgeted item.

o Keep insurance premiums paid.

o Contact your creditors and explain your financial situation. Show them your budget and a list of your debts. Ask if they will work with you until you can adjust.

o Use community resources such as food pantries to supplement your income while you are reorganizing.

o Look for ways to increase your income.

Learning positive money management techniques can help you and your family adapt to tough economic times. For more, visit "www.extension.org/personal finance" and click on "managing money in tough times."

Lynn Little is a family and consumer sciences educator with University of Maryland Cooperative Extension in Washington County.

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