Bad Money Habits – Unemployment

DFN: Job Connections ‘teaches’ to look for the good coming out of a bad situation. Clearly, unemployment is a bad situation, but, as this article points out, it forces those (like my wife & myself) in unemployment to critical review their spending habits. Gardner – gone. Housekeeper – gone. Cable TV – switched to Astound at half the price. Two newspapers – done to one. Stopped taking cash when making purchases, went to bank to get cash. Switched credit card balance to a ‘special’ one year no interest. Lowered the minutes of cell phone use from 1400 to 700. Trim trees in front year – postpone. Redo plumbing in house – postpone. Now that we’re both working, we’ve continued our thrifty ways (more or less).

Bad money habits are magnified when people face unemployment
By Michelle Singletary
Washington Post / December 13, 2009

After spending most of the year desperate for employment, Bobbie and Juan Wilson and Rick Rose – the participants in the 2009 Color of Money Challenge – are working full time again.

For this Challenge, I decided to focus on individuals affected by job loss. The Wilsons and Rose had agreed at the beginning of the year to allow me to follow them as they searched for work. They opened up their financial lives.

Today, the Wilsons and Rose are grateful they will no longer be counted among the millions who are out of work.

“I’m just glad we finished the series with everybody finding work,’’ said Rose, who was hired in August as marketing and communications manager for a partnership between the Brookings Institution and the business school at Washington University in St. Louis.

Part of what I did was to look at how they handled their money before their unemployment. Rose was a good money manager, although he could have been saving more for retirement.

The Wilsons, like many Americans, used credit too much and didn’t budget.

What all the participants learned was that whatever they did wrong before they lost their jobs, it was magnified once the regular paychecks stopped coming. “I feel like a lot of money was wasted because we didn’t know where it was going,’’ Juan Wilson said.

Over the year, I showed the Wilsons how to budget. Together they used to earn $98,000 a year and yet had little saved. They often had several hundred dollars a month in overdraft fees.

I put the Wilsons on the envelope system. Aside from some bill-paying online, they started putting into envelopes money from Bobbie’s paralegal job. The envelopes were labeled with whatever expense they had to cover. I told them to put the debit cards away because they weren’t coordinating with each other.

The couple no longer is paying overdraft fees. They meet every Wednesday to discuss what bills have to be paid. They’ve decided to save what Juan earns to help build up an emergency fund.

Wilson had hoped to find work in the information technology field, and he’s taking courses to become a Cisco Certified Network Associate. For now, he’s happy he landed a night-shift warehouse job earning $10 an hour.

In many respects, the Wilsons and Rose were representative of trends that have developed as a result of the recession. Rose reflected the upward trend of long-term unemployment. It took him 15 months to find a job. The average duration of unemployment is now 28.5 weeks, up from 19.2 a year ago.

The Wilsons typified people who take any work they can get. Juan and Bobbie both worked part time when they couldn’t find full-time employment. Bobbie Wilson is working as a contract paralegal. Her contract has been extended but she doesn’t know for how long. “This year has been tough,’’ she said.

Michelle Singletary is a columnist for The Washington Post. She can be reached at singletarym.

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