How to Handle Getting Laid Off

If you want to read what I've done to stretch out my funds to keep my family afloat, skip this and scroll down

I and seven other were pulled into the department manager's office. There was some small talk about what we'll be doing for the weekend, and some status updates about various projects; however, the manager was looking as if she was holding back some news. It was at this point that I knew something was amiss, and my instincts were correct. 

We were told that our last day was Friday, and that we are now being transferred to the temp department for the company. Many of the people teared up, along with the manager, but I felt oddly calm. I never been in this situation before. Any job that I had, I left on my own terms. I was never fired or laid off, but this was different. 

Now, after the whole shock of losing my job wore off, I need to make a plan of action. As you may know, I have a toddler and my wife who is now pregnant. We had plans for the next year with our budget and what we wish to accomplish, but now those plans are gone. I no longer have a steady paycheck or benefits. This is the same situation anyone who lost their job is feeling. The "I lost my job and can't pay my bills."

Thankfully, I have enough resources to last me until mid January. I do have a side business doing consulting and selling items online that pulls in a few extra dollars. I can still cut expenses. 

So now you know what my current situation is. My goal, since I now have so much free time, is to blog what and how I will cope with this life changing event. My goal is to either find new employment or move my business from part time hustle to a full time endeavour. I hope you join in for the ride of a life time.

But you are not reading this just for a sob story. Here is what I've done so far to handle with change of losing my job:

Ten Things I did when I got laid off:

1. I looked at my YNAB reports to see any and all spending trends since March 13. I identified areas that we were spending money in that could be cut back.
2. Called up my internet company and reduced our broadband from 40Mbps to 20Mbps saving 30 dollars.
3. We are withdrawing only 100 dollars per month to spend in three very basic categories: Groceries, Household supplies, and blow. We normally spend around 600 dollars in this area, so we are now only spending 400 dollars. We reduced spending by 200 dollars or 33%.
4. Thankfully, I am not upside down in my car loan, so I am researching how to sell a car with a loan. This would save 160 dollars per month (payment and insurance).
5. We are cutting Hulu and I bought an antenna to get free television. 
6. I am looking at doing some freelance work at various freelance websites.
7. I am learning how to cook.
8. I am learning Python programming language.
9. I am offering free training in QuickBooks and QuickBooks Point of Sale
10. I am relying on Stoicism and faith a lot more. (I know, it is an odd combination!) 

This is just a rough list that I've done, everyone is different. If you have any advice or comments feel free to share!

How To Pay Off Credit Card Debt

Debt is a horrible master. Nothing saps wealth like being in debt. Just take your monthly payments, add them together, then times it by twelve.

How much do you spend on debt?

Once you get the number go to this compound interest calculator. Set as the interest rate a reasonable rate (try 6%). Then set the years to the average length of a car loan (5 years), then take your monthly amount you spend on debt and add it to the calculator. Select the compound interval to yearly. What is the number you get? Image what you could buy or save if you paid off debt!

How do you pay off debt? Follow these simple steps:

1. Get the current balances for your debt accounts.
2. Throw the amounts and list in excel or Google spreadsheets.
3. Sort the list from smallest to greatest.
4. Add due dates, minimum monthly payments
5. Pay off the smallest amount ASAP
6. Take the minimum payment you were paying for the smallest balance and add it to the next smallest balance. Ex: Visa minimum is $50 per month, Master Card is $100. After VISA is paid off, apply th $50 to the Master Card monthly payment making it $150
7. Keep doing this until you reach your mortgage.
8. At this point I would apply half of what you were spending on consumer debt to pay off your mortgage faster!
9. Celebrate!!

How to Control Spending

One of the key areas of controlling your finances is to control expenses. To many, this might be a very obvious point, but in reality it is much harder to do. We all know that the less you spend the more you can save, but do we really apply that advice? How many of us can put off instant gratification so we can save?

The problem boils down to psychology. Our present selves view our future selves as complete strangers. Because of this, we tend not to take our futures too seriously. We do things and expect our future selves to fix the problem. Sound familiar  Take diets and exercise. We choose to eat poorly and not exercise, we gain weight. We know we should exercise and reduce the amount we eat, we know that if we don't we will develop health problems, but we can do it later. We wholeheartedly expect that our future selves will fix the problems. The failure of this method, this thought, is that we are the future selves, and eventually (as will all people) we won't have a future self that will fix the problem. 

To go back to my point, how do we control spending? The easiest way to do it is to track spending. Record every time you spend money. This sounds very tedious, but it is illuminating. Do this for one week, and you will be amazed on what you spend. Many times, we swipe our cards and not thinking about it. These purchases, the ones we do without thinking, cost us the most. The goal of this exercise is to make us conscious of our spending. 

After doing this for a few weeks one will become more aware of the flow of money. This is a key point of taking control of your money. YNAB helps, because unlike other software (Quicken and Mint) you have to manually enter each transaction. Quicken and Mint automatically categorizes your transactions. This means your daily routine of analysing your finances becomes nothing more than viewing graphs and making sure your software categorized everything correctly. 

One final method of controlling expenses is to use cash. Cash is finite. How hard is it for you to break a hundred dollar bill? You are more frugal when your wallet is filled with hundred dollar bills than with singles. You can visibly see your money deplete, and once it is gone you cannot spend more. If you combine this method with tracking your expenses (either using a spreadsheet, Quicken, Mint or YNAB) you will see an increase of funds within a month. My wife and I noticed an increase of $200.