The Dave Ramsey Show: How to Budget After a Job Loss
Written by
Katie Wudel
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
Losing a job is an emotionally and financially challenging experience. Managing your finances effectively is critical. Dave Ramsey and his co-host Jade Warshaw offer practical advice on budgeting after a job loss. These insights are not only valuable for navigating through this tough period but also for laying a strong foundation for future financial stability.
Focus on the Basics
Warshaw says it’s important to focus on basics. Make sure your needs are taken care of. The first step in adjusting your budget after a job loss is to fully understand your new financial situation.
“When you’ve had a job loss, put your four walls first,” said Warshaw during an episode of her show. “That’s food, utilities, shelter, and transportation. In other words, you need to feed your family, keep the lights on, pay the mortgage or rent, and put enough gas in the car to get where you need to go.”
It’s essential to calculate your total income, which may now include unemployment benefits, severance pay, and savings. Equally important is a thorough review of your expenses. Ramsey and Warshaw suggest creating a list of all monthly expenses and categorizing them into necessities and non-essentials.
Pause Extra Debt Payments
Getting out of debt is important, but it’s best to pause extra payments while you’re getting back on your feet. You can increase payments after you’ve established your finances.
“If you’ve got debt and you’ve been paying it off like crazy, that’s awesome,” said Warshaw. “But I want you to push the pause button on those extra payments. Cover the minimum payments only, just for now, just while you get back on your feet.”
Prioritize Expenses and Cutting Costs
Once you have a clear picture of your income and expenses, the next step is to prioritize. Necessities like housing, utilities, food, and insurance should be at the top of your list. The Ramsey team recommends a zero-based budget, where every dollar is accounted for, ensuring that your spending aligns with your priorities.
This is the time to cut any non-essential expenses. Subscription services, dining out, and other luxuries should be minimized or eliminated. Ramsey emphasizes the importance of living within your means, especially during a financial crisis.
Create an Emergency Budget
An emergency budget is a scaled-down version of your regular budget, focusing solely on essentials. This budget should be as lean as possible, reducing expenses to the bare minimum. This might involve tough choices, such as downsizing your living space or selling a vehicle, but these decisions can significantly extend your financial runway.
Seek Additional Income Sources
Find alternative sources of income. This might include part-time work, freelancing, or selling items you no longer need. Ramsey often highlights the importance of not being overly selective during this time. The main goal is to generate income.
Utilize Your Emergency Fund
If you’ve followed Ramsey’s advice prior to your job loss, you likely have an emergency fund in place. This fund should now become part of your budgeting strategy. It’s designed to cover essential expenses during times of financial hardship.
However, it’s important not to deplete this fund too quickly. Continue to look for ways to reduce expenses an increase income even when using these savings.
Plan for the Future
While dealing with immediate financial challenges, it’s important to plan for the future. This includes actively searching for new full-time employment and possibly upgrading skills or education. Once you’ve achieved financial stability, consider revising your long-term financial goals and possibly seeking professional financial advice to realign these goals with your new circumstances.
Bottom Line
Budgeting after a job loss is a challenging but manageable task. Ramsey’s team provides a blueprint for managing finances during job loss, emphasizing the importance of discipline, planning, and a positive outlook for the future.
Editor's note: This article was produced via automated technology and then fine-tuned and verified for accuracy by a member of GOBankingRates' editorial team.
More From GOBankingRates
