If you ever feel like you’re at the end of your rope… tie a knot baby, and hold on tight!
– Steven Tyler, Aerosmith
It seems that the quote comes originally from Roosevelt, but I remember it from an Aerosmith concert in the mid-1990s. Google didn’t exist yet, so, to me, Steven Tyler owns the quote.
Yesterday I explained how I got an e-mail from a woman who lost her job and the feelings that I went through in a similar situation. Today, I’ll detail what I did about it then and what I’d do about it today.
(* This was originally written in 2007 but, with few edits, it is still applicable today. As COVID-19 continues to make 2020 terrible, this may help you or someone you love.)
First off, I’d break your plan of attack into three phases:
Phase 1 (Immediate Term) – Desperation mode
Before you even begin this phase, I hope you have an emergency fund.
Step 1 – Cut costs
Look around at everything that costs you money. Try to either eliminate it or bring the costs to a minimum.
- Extras – I would quit most any subscription service… Netflix, Cable TV, Vogue Magazine… all gone. (In COVID-19 world, this advice may not be the best, it gets better.)
- Food – I’m not entirely joking, but I’d go on the Survivor diet – lots of white rice and water. Perhaps some Ramen noodles if you want to splurge. I’d mix some beans in as they are a great source of protein and fiber and are relatively cheap. Eggs can be a good cheap option as well. Chicken is extremely cheap as well. We are lucky that food costs in 2020 are low if you are flexible on nutrition for the short term.
- Insurance – Use COBRA to get health insurance unless you have a better option such as a spouse.
- Housing – The woman in the email had a home and mortgage payments. If you own a home, can you get a roommate? Is AirBnb an option? Is it possible to sell it and downsize or rent?
Step 2 – Earn an income
It’s impossible to make payments on your home without money coming in.
- Look into Unemployment – This is an obvious first step, I hope. When I was jobless, my unemployment benefit was quite large as I was downsized from a high paying job. The downside of this is that it discouraged me from looking for work. With unemployment, if you make $50 that week, you report it and then you get $50 less for the week. This extends your time on unemployment though, so if you are still unemployed when your unemployment would have run out, you’ll still have that $50 to get the following week. This was poor motivation for me to take any available work, which would normally be my instinct. For example, if I took a minimum wage job, I would be working 40 hours a week for literally no money. It’s a strange system in my opinion.
- Make Extra Money – See if there some ways you can make an buck on the side. There’s another great example at Get Rich Slowly.
- Think about small jobs – Don’t be afraid to work double shifts at McDonald’s or some other fast food place. I used to work at a fast food place and I actually thought it was fun (in high school at least). The bonus is that if you work the night shift, you can often bring some leftover food home. It wasn’t uncommon for me to bring home 12 calzones a night that would have otherwise been thrown out. They went into the freezer and our family had food for months.
Focus on what skills you have. Maybe you can teach a class on something better than most people. Maybe you can create logos on Fiverr. One benefit of 2020 over 2007 is that we have a robust gig economy. I make money dog sitting.
- Talk to Friends – Tap your social network and see if you can find a job there. I once found a job for a friend through another friend… and none of it happened through a social network. It was talking to people in real life.
- Look for Jobs Online – Look online at Monster, CareerBuilder, and Indeed. LinkedIn is an obvious way to go.
- Blogging – Blogging for money is possible, but expect to earn somewhere around 5 to 10 cents per hour spent for the first 5 months. It took me a year of 2 hours a night (on average) to make a thousand dollars a month… but it was much, much easier in 2007. Most people spend their time on social networks, not independent blogs. Thirteen years later and it’s a struggle to grow beyond a thousand a month… and I know a lot of bloggers who would love to make a couple of hundred dollars a month.
Nonetheless, if you are looking into blogging as a longer-term solution here are ten reasons to be a personal finance blogger. And here is a little guide to being a successful blogger. (Note: These articles are in need of updating. They are good motivation, but there is better practical advice out there.)
- Consider selling things you have of value – This is a tough decision and must be made on an item by item basis. You may have a few hundred dollars in stuff from eBay, Craigslist, Facebook Marketplace, or a garage sale.
Step 3 – Take Care of Yourself
It’s more important now than ever. I originally meant that because losing a job or dealing with any kind of financial hardship is tough. Coronavirus turns it up a couple of notches.
- Pay Attention to Your Health – It’s easy to get depressed when in this desperation mode.
- Be Social – When I was laid off in 2001, I was lucky enough to live with roommates. They pushed me to be social when I worried about the expense of the restaurant meal or drinks at a bar.
- Exercise – My apartment building also had a gym, so I scheduled a block time there every day. If you are on the cheap diet I mentioned above, you should be working out. Exercising releases endorphins which will make you feel better. Studies show exercise works as well as (or even better than) some anti-depressants.
Phase 2 – Recovery
Hopefully, you won’t be without a steady income for a long time. I had to go for two years until software engineering jobs came back. That’s a long time to try to get by on emergency fund.
If you took my advice and ended up getting two minimum wage jobs, chances are you are going to burn out before too long. It’s almost like treading water, you just want to prevent yourself from sinking. Once you’ve stopped the bleeding, it’s time to begin the recovery phase. The recovery phase is where you will need to spend any spare time looking for one job that used to pay like the one you previously had. That means making a huge effort to apply for new jobs in your industry. You may find that you need to learn new skills or require additional education. It will be hard to do this while you are working two jobs, but it’s necessary to get back to where you were.
Phase 3 – Prevention
If you’ve been able to secure a salary near what you had before the job loss, you are ready to enter the third phase – prevention.
You want to prevent this situation from happening again. You want to build back up that emergency fund. I prevented a total loss of income by building passive income streams. That way if I lose one, the others can keep me afloat. Looking back at this 13 years later, my wife and I have a very solid net worth, great retirement income, some rental properties, equities, side hustles (blogging, dog sitting). We can be financially independent in a couple of weeks by eliminating extra education costs.
Originally published May 15-16, 2007
For fun here are a couple of the outdated references I removed:
– Vonage’s cheap per minute VOIP home line instead of a traditional landline
– Advice of getting rid of your cell phone. Now just get a cheaper phone and a cheaper plan.
– Use HotJobs as a source to find new jobs
Along with #3, I would add “You are not your job”. If you define yourself through your job or productivity, it will be a real shot to the ego. I know it sounds goofy, but try and use the time to find out what you truly value, what you want in life, and who you are.
Blogging although you won’t make money, especially not in the short term, may help you think through a plan for your life and create a social support network. Both of these are big positives.
For income, I would try go for something a little better than fast food. I enjoyed pizza deliver, if you have access to that. The hours were good, and the pay was 9-15$ an hour. I good part about working a ‘service’ job, is that it motivates you keep looking.
-The Happy Rock
When I was laid off. I did 3 things that same day. 1) Called my recruiter and let him know —so he can start looking for contract positions
2) Went to the unemployment office to apply for benefits ( receive my first check in 2 weeks)
3) Hit up a small portion of my emergency fund.
I was married at the time, so my husband paid for most of the bills and my employment checks covered a few bills and gas and food.
The good thing I found a better job that paid $12K more than my last job.
Sometimes when you are laid off it’s like you are a free agent !!
Here are some things I might add…
When I was younger and in “Survival Mode” I would collect aluminum cans. Definitely won’t get rich, but I’ll bet you make more than blogging at least initially. Aluminum prices are fairly high – I would always hit grocery story dumpsters and golf courses (at dusk). Tons of beer drinkers on the course – would find 20 cans in the garabage bins per hole. Desperate times call for desperate measures!
I also did these medical study things while I was in college. They were medically supervised trials of drugs, medications, etc. They were very safe and completely controlled and you would make anywhere from $200 to $2000 per study. The company I was involved with was called Harris Labs – of course not all cities have something like this available. Being a guinea pig as a college student was awesome – get paid to study!
This is obvious, but temp work was usually pretty profitable too. Sometimes interesting as well. I always got some pretty fun assignments, ex. being a greeter at a trade show, helping set up computers, etc. Pay was decent and it was good for networking.
Great post, and comments. I concur with Jon say about temp work. Alot of time Temp work can lead to a permaneant job – it has for alot of people. I’m lucky I’ve never been laid off, but given the way the economy work today that can always change. We all need to know we can do what it takes to survive. That’s more important than money itself. Never be too proud.
Along with cutting costs, make sure you have looked into every source of revenue/income. When I quit a job unexpectedly, the first action I took was to call some business contacts for any job openings coming up. The second was to look at my cashflow and figure out how to make it through a short term crunch.
Things to ask yourself:
-Who owes you money?
-What assets can you sell? A lot of PF bloggers are into eBay. Me? I liquidated some stock holdings that I couldn’t take with me anyway. It was worth 1.5 mortgage payments.
-When you cut costs, think of how you can consolidate your debts to reduce your minimum monthly payments. Be as tightfisted with your cash as possible. It might mean being able to go an extra week or month without an income.
Along with temp work, try pimping yourself out as a handyman for small tasks in the neighborhood and take cash only. Working under table informally can get you through a pinch. Oh right, SWALLOW YOUR PRIDE. That goes along with the working at a fast food joint advice. Don’t be too proud to do something like housecleaning. Remember that it’s only short-term and not who you are.
This cook eats her own cooking. I worked retail and waited tables during my self-imposed unemployment. I stuck it out till I got an offer for 40% over my previous job. I sweated bullets for 5-6 weeks till I got hired, but I would do it again if I could get another 40% raise! (Ok, I did learn my lesson and start an emergency fund, but even with a fund, I’d still go back to waiting tables and retail. No point in draining the fund if I don’t have to.)
If you’re a programmer, check out short-term gigs on the Web that you can do from home. Sure, you’re competing with guys in Bangalore, but it’s still money. There’s always someone looking for a little language parser or file conversion utility that can be coded up in a couple of hours and can make you a few bucks. elance.com is a good place to start.
And sometimes these can develop into Real Jobs.
Being in the earlier part of my career I can say I have had the good fortune to have never been laid off so far. Working in the technology field which is always changing and evolving, I would assume it will happen at some point in my career. I narrowly missed a round of lay offs at my last company having just accepted another job a few months prior. I always try to keep my resume updated and subscribe to daily job listings from Monster, Careerbuilder, and USAJobs just to keep updated with what jobs are in demand and what companies are hiring. I really like the company I am at now and intend to stay as long as possible, but in today’s market you can never be too prepared.
I have been on unemployment after being laid off at a dot com. I’ve also done the “reduce burnrate” thing from $3,000 month down to $900/mo. I think a big key factor is that we slowly increase our burnrate without knowing it. A magazine subscription here or there, Netflix for $15, Tivo $15, adding text messaging for $5, etc… pretty soon we’re spending everything we make.
I was laid of this year. Totally came out of left field and wasn’t expecting it at all. They did offer me a month of severance pay, but you didn’t get that til a month later. And they carried my benefits for 2 more months.
I did about the same as everyone else.
1.) Took the rest of the afternoon off (not that i had the choice) and didn’t think about a thing.
2.) I showed up to a recruiting office and managed to score a interview on the spot for a position that they had.
3.) went home and applied for unemployment online, much easier, and less of a pain in the ass.
4.) Cut all costs as the article says.
I scored a job that week, but I put in about 90 hours in that week that I got laid off. Losing your job, turns your new job into looking for a job. If you put your 40 hours in looking for a job you’ll get one.
3 months later. I’m sitting with an extra 20k in my pocket, with full benefits that cost me 35 bucks a month. Score.
Just what I needed to read today… Thanks for the post. It’s nice to be reminded that it’s possible to live on less, whether we want to or not.
Great suggestions here, but I have to say that I don’t agree with all the of your phase 1 ideas. Often dropping your cell phone completely will cost you about $200 for ending the contract, so maybe you should consider dropping it to the lowest possible per month plan and only using it weekends/bare minimum or trying to sell your contract on one of the websites out there or a friend/family member. $200 now may be the wiser choice compared to the monthly payment, but you have to consider all the options.
Also, cobra can be a huge huge expense. You’d be shocked to find out that the same benefits you paid $150 a month for when you worked there will now cost you $500 per month! It’s a great idea, but the costs can end up being ridiculous! I suggest going to esurance.com and look into getting a bare bones plan for emergencies which can be more affordable than cobra.
I guess I made the assumption that the person is out of contract on the cell phone. I would be cautious about telling someone to drop it to the lowest plan per month as that often requires extending the contract.
I’ve lost my job and even though I was 22 with no health problems, I still think that cobra is usually a fantastic deal vs. the alternative. It may be worth calling around, but as soon as you bare bones, you know something big is going to pop up.