Unemployed and Savings Going, Going, Gone? Tips to Stretch Your Unemployment Check

Unemployment Check The recession's over -- yay! To the 8.9 percent of Americans who remain jobless, that's as much reason to celebrate as this year's Groundhog Day prediction for an early spring. (Which also turned out to be substantially untrue.)

For the unemployed, hours and hours spent online and pounding pavement for a job search need to be supplemented by hours toward money management. Just cutting out the $5 Starbucks and using last year's spring handbag won't do. We're talking tough choices and no messing around.

AOL Jobs spoke with noted author and personal finance expert Jean Chatzky, creator of the Debt Diet online program.

Work backwards

Working with unemployment checks or a dwindling savings account, budgeting is no easy task. Chatzky recommends working backwards.

"You have to start with a list. 'This is where my money is going today.' It's very difficult to budget from scratch," she says. "I think the easiest way to budget is backward. This is where my money is going now and then you can make changes."

The bank account can seem like a ticking time bomb as the balance drops because there isn't a salary flowing in. Chatzky says it's not just about saving; it's much more serious than that.

"When you look at the amount of time it's taking to get that next job whether you're out of work or not, you have to realize we're not living in great times," she tells AOL Jobs. "That calls for more austerity and more careful care taking of your money than when you're living in another time."

While none of it's easy, the easiest way to start is to identify fixed costs like rent, mortgage, and car payments. For other expenses, consider how much can truly be cut. This is when a person needs to consider if 600 cable channels or cable TV at all is necessary.

"The people that I've seen throughout this recession that have the biggest problems are the ones who continued to live as if there were two salaries coming into the family when there was really only one (and one with unemployment payments)," says Chatzky.

Desperate times call for ...

A 2010 CareerBuilder survey reported that 8 out of 10 Americans live paycheck to paycheck. Chatzky says that's got to change, especially when there's no paycheck. She says that means asking the hard questions like:

  • Do I have to rent out the room above my garage?
  • Do I have to pull my kids out of private school?
  • Do I have to sell one car?

When the money situation is beyond bad, thoughts often turn to filing for bankruptcy. But that's not an easy out anymore; debts are not excused like they used to be. The process is longer, now requiring a course of credit counseling.

That rainy day that may come after age 65? Don't even think about it. Chatzky warns against cashing in 401ks and other retirement accounts, in case of bankruptcy or not.

"Pulling money out of retirement accounts should be far down on the list," she says. "Those assets are protected in bankruptcy. You can lose 30-40 cents on the dollar in taxes and fees."

All is not grey skies. Chatzky reminds us that there are people getting jobs every single week, every single month.

Jean Chatzky is also the financial editor for NBC's 'Today' show. Follow Jean on Twitter @JeanChatzky or on Facebook.

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