Remember, 85% of things we worry about don’t happen and the 15% that do, is not as bad as we thought

If things do not get better, it may fit to modify the mortgage balance

Of course, if they didn’t have those benefits, then their salaries would also be a lot higher.
Oh, and nobody should accept Social Security or Medicare because the money for those programs are slated to run out in a couple of decades. (Social security because congress already spent the surpluses in previous years, Medicare because health care costs are rising at a rate greater than inflation.) Go ahead and refuse all government programs if you like.

Note also that only 25 states are currently underfunded with UI even now, AND that’s only because we’re in this horrible recession. If you introduce a time element, unemployment insurance is generally not underfunded at all. The big arguments about problems with UI are that even though it’s experienced rated (that means if your company has a history of laying off, your company has to pay more in insurance premiums to the government), it isn’t experienced rated ENOUGH (there’s an upper limit to how much companies have to pay– the idea being we shouldn’t hit companies while they’re already down). That means the government is giving a subsidy to mainly the construction industry and other seasonal work. Feel free to take up that problem with construction workers.

Now granted, it does make sense to downsize and get the least expensive options (get a lot fewer minutes on that cell phone, get the least expensive DSL Internet plan), but don’t drop them entirely.

This is good advice, yes, of course, you need to apply for unemployment, but don’t pass up a job that is in your field, but might pay $10,000 a year less. That doesn’t mean you will be paid that forever. If you do a great job, you may be back up to your old wage shortly. Also, the longer you are without work, the more an interviewer looks critically at you. They are thinking why is this person STILL not working?
I have been trying to convince my son to do this, to no avail. Now, he has about a month left on unemployment and no job.
To me a lesser paying job is more desirable than a lot lesser paying job flipping burgers at Mickey D’s!
Also, many employers check your credit record, some states allow them to do so without your consent, or employers do it illegally. (Known some who have done it illegally). You don’t want to miss payments, make arrangements to pay only the interest, if possible.

BUT.. these people have nothing in savings and credit card debts. It is definitely time for cut backs on their spending levels. If they don’t cut their spending now they’ll be in serious risk of losing their home within months. So they definitely need to make some cuts. And I think picking up side income by both the husband and wife is also a good idea at this point.

I don’t think its panicky or Chicken little to act quickly and treat this seriously. Otherwise they may continue to spend like they have and then they’ll be in real trouble pretty quickly.

I am not so sure either person is “to blame”. Losing a job in this economy is usually not about the worker – it is about the employer.

Now, Trent, if you mean they share the “blame” for their 10K debt, then yes, that MIGHT be true (but you do not know for sure) and even if only one person is to blame for that, they have shared responsbility in at the present time. But being out of work and trying to make ends meet is not about doing anything wrong.

Sure they are at fault, in the end we are all responsible for our own actions. Worrying about fault and blame is pretty much a waste of time for them at this point since you can’t have a do-over, you can just improve the future with the resources you have.

I agree also that they don’t need to panic now or ever, really — this is pretty much a straight numbers problem where they can make reasonable predictions for the next 3-6-12 months, and come up with plans for what to do — even if those plans involve hard decisions like selling their house, moving, selling cars, relocating, etc. Just because it’s a hard decision doesn’t make it panic.

They need to sit down for a couple of days and write down some plans, run some numbers and figure out how to get through it. Time spent selling stuff to the walls on eBay and CL is time you won’t get back — and it can likely be put to better use, at least for now.

If there are obvious “big wins” (think > $50-100 per item) sitting around, sure — sell them off and do something useful with the money. Otherwise, the husband should be polishing up that resume till it shines, working his networks (FB, LinkedIn, etc). If he’s looking at craigslist, it should be to find work — either one time gigs or permanent employment. Selling CD’s at $2 a pop may help to give you something to do, but at this early stage there are really better uses of his time. Like making a written plan.

The bottom line, which no one else has addressed is that this happened *yesterday*. It didn’t happen 6 months ago or even 6 weeks ago. There has been no impact that Susan and her husband can actually feel yet. They’re just having a pure fear reaction.

So, deep calming breaths. Do the paperwork for EI (or unemployment or whatever it’s called where they live). Look at all the current expenses and see what can easily be cut (satellite or digital cable, Netflix, landline, any other ongoing expense that doesn’t contribute to keeping a roof over their head and food on the table or keeping them protected or where removal of the expense would impede his job search).

That specifically means don’t take a minimum wage job unless you are ineligible for EI or your benefits have run out because it would be a) less money and b) tie you up for 8 hours per day when you should be out there interviewing and c) will not be a plus in landing the next job in your field.

Ditch the landline but keep the cell. You need to be constantly reachable. Ditto, don’t ditch internet unless you reach a point where you really have to. As others said, you’re in IT. If you unplug from the net you are *far* less likely to get hired unless you’re planning on monopolizing a computer at the library all day, every day (and the other people wanting to use it may have something to say about that!). Besides, why spend money to get to and from the library every day? Save the money for gas or bus fare to your interviews.

Look for places to cut back at home. Plan your meals around weekly specials, shop from a list, stop eating out. Is either one a smoker? Now would be a great time to quit. Don’t buy booze. Look for ways to cut energy usage and utility costs. Temporarily stop contributing to retirement accounts unless Susan has a plan that includes matching, in which case she should just contribute the amount necessary to get the match. If EI runs out, consider stopping those contributions too.

Just don’t panic. There are many things you can do without selling your house or every possession except for a few dishes, clothes and a bed! Start cutting now. See how you do over the next couple of months. Cut back more if necessary. When your benefits are about 6 or 8 weeks away from running out is the time to start making the really drastic cuts.

I liked the idea about learning new Open Source stuff and re-inventing yourself into a better job. Far, far better than sitting around playing WoW while you wait for an interview!

If you are seriously underwater on your home, then I would pay the credit cards first. If you have a goofy mortgage (high-interest ARM, interest-only, etc.), then I would pay the credit cards first.

A friend of mine is unemployed. He refinanced about 5 years ago, at the height of the bubble, into an interest-only loan. Now their townhome is worth $40K less than they owe on it. Even if he got a job again, they would have a hard time making the payment when the loan recasts to include the principal, and since they are upside down they wouldn’t be able to refinance. I think they should pay the mortgage last.

I hope this is not the situation Susan and her husband find themselves in – and there are no indications that it is. But I just wanted to make the point that “prioritize your debts that have collateral” is not a universal rule. Not anymore.

I’m guessing from your inability to pluralize and utter lack of understanding of the time demand of teaching, you aren’t a teacher. I work 45-50 weeks (plus a second job). My roommates who are teachers work 7-4 (yeah, they’re getting off earlier than you 9 to 5ers, but they go in earlier), and then come home and grade or prepare lessons/activities until 9 at night and most of the weekend. Yeah, we get school breaks off, but we also get no vacation/personal time (so while other workers get 3 weeks of paid vacation to use when they please, we get a week at spring break and two at christmas, for example). Summers are spent in professional development. Yes, it’s possible to get a second job while teaching, but it’s just as difficult (if not more so, in many cases) as it is for other workers. This doesn’t even touch the time demand of coaching or being involved in extracurriculars. Actually, come to think of it, that might not be a bad place for her to look for an income boost, depending on what level she teaches–most schools pay an extra couple thousand for running sponsored clubs, which could provide a little income booster or emergency fund starter.