Live on a budget or get your money back

Those whopping jumps in jobless claims reported this morning cause tremors on both sides of the unemployment line.

On my side, one of my first (selfish) thoughts was, Oh great, another 573,000 people are competing for the job I’m hunting for. But on the other side, I thought again how scary this must be for anyone still working but worried they won’t be soon.

Then I realized that no matter how shaky your job might feel right now, there are no-cost things you can do now to ease the financial pain of losing a job. And I have an idea that that even gives you money back if you miss the last swing of the axe.

The no-cost things basically involve budgeting. Contributors to Yahoo.com and other Web sites, along with some bloggers I ran across at MyDollarPlan.com and HarvestingDollars.com, generally recommend creating two unemployment budgets – one that allows you to live comfortably but thriftily until you work again, and another that plots bare-bones spending to stave off disaster.

Then theoretically, you divide your total emergency savings by whatever weekly or monthly budget amount you’ve calculated. That tells you how long your safety cushion should last.

My idea? Road test your budget before you need it. Do the budget calculations, plan the spending cuts you would make, and then actually try living on that budget for two or three months. Pop the money you don’t plan to spend into an interest-bearing savings or money account. That way, it will still be there if you discover you forgot something in your emergency budget or you will have extra money if you’ve budgeted well.

By the way, road testing your retirement plan this way to see if you really can live your retirement income works too.