A financial planner’s strategy to cut spending during unemployment prioritizes your mental health

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Forty-four million people have filed for unemployment in the past 12 weeks, according to Labor Department data.
For anyone who’s unemployed right now, cutting every extra expense immediately might be unnecessarily stressful.
If you can afford it, gradually cutting discretionary expenses over the course of your unemployment could be a more sustainable method, says a financial planner.
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If you’re out of work due to the coronavirus pandemic, you’re not alone.

Over 44 million Americans have filed for unemployment in the past 12 weeks. Nearly one in four Americans has lost work during the coronavirus pandemic. At a June 10 Federal Reserve board meeting, chair Jerome Powell predicted that there would be “A significant chunk, well into the millions … who don’t get to go back to their old job.”

As the economic slowdown and coronavirus pandemic have drawn out over the past several months, strained budgets and drained savings accounts have become common. While cutting expenses may be necessary, it can be hard to part with the things that made life feel normal right now.

Financial planner Anna N’Jie-Konte of Dare to Dream Financial Planning says cutting your expenses all at once during unemployment could be overwhelming. Instead, she recommends taking a phased approach that will eliminate spending over time, depending on how long you’re dealing with unemployment.

If you can afford to keep some of your smaller expenses for a few months, it could be worth it. “Revisit all of your expenses and really pare them down, and have a phased approach,” N’Jie-Konte says. For example, she says, “‘If I’m unemployed for three months, after the third month, I’m going to cut this. If it’s more than six months, I’m probably gonna pare back these other things.'”

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Changing your spending habits can be emotionally difficult

“Emotionally prepare that this could be a protracted, longer-term thing,” she continues. Cutting every unnecessary expense at once — things like streaming services or cable, memberships, or even just extra purchases at the grocery store — might be harder on yourself than it’s worth, and may not be sustainable.

This method could make it easier to cut back on those expenses, and allow you to prioritize the things you enjoy. It can make an emotionally difficult process a bit easier, and help you prepare for what the future could look like — something N’Jie-Konte says will be useful as the pandemic and recovery continues.

“Mentally preparing for that can help mitigate a lot of the emotional toll,” she says, “especially if things last longer than maybe you would have hoped or planned for.”

In addition, she encourages anyone facing unemployment during the pandemic to be resourceful about bringing in extra money. “Look at ways to go on your own and earn some freelance or self-employment income,” she says. …read more

Source:: Business Insider

      

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