From The Grio — As President Barack Obama and his economic advisers work to stimulate job growth in the United States, many economists are predicting that the country’s current unemployment woes won’t disappear anytime soon.
This begs a troubling, but important question: What should you do if chronic, high unemployment persists for many years to come?
Already, 1 out of 3 job seekers has been out of work for a year or longer. And though unemployment is currently at 8.8 percent nationwide, it’s much higher in communities of color. For instance, the jobless rate among African-Americans actually increased this past month, to 15.5 percent.
If widespread, unusually high unemployment is — or becomes — the new normal in America, here are five ways to cope financially:
1) Downsize Now
For most Americans, housing eats up the biggest chunk of their income. Whether you’re a homeowner or a renter, you’re likely paying about one-third or more of salary (or your unemployment check) for shelter. In high cost areas of the country, like New York, it’s not uncommon for people to spend 50 percent of their pay on housing.
Historically in the U.S. people have downsized to smaller homes as they’ve entered retirement (around age 65) or as the kids grow up and leave home. But if you’re currently out of work, or fear that your job may be at risk, a smarter strategy is to downsize now — even if you’re only in your 30s, 40s or early 50s.
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Having a smaller home offers a host of financial benefits that could help you rid out a prolonged jobs downturn. You’ll have a smaller mortgage (or cheaper rent). A smaller house or apartment also means you’ll need less stuff, so you’ll wind up doling out less cash for furniture, electronics and household goods. Plus, if you’re a homeowner, who downsizes you’re likely to have lower property taxes, a smaller home insurance bills, and more manageable utilities costs as well.
By the way, downsizing doesn’t always have to mean going to a smaller living space. Many Americans could benefit from downsizing financially and moving to less expensive parts of the country. That’s precisely the pattern occurring now as more people relocate from places in the Northeast to regions in the South, including Atlanta and North Carolina. The trend is particularly strong among college-educated blacks who are flocking to Atlanta for better career and economic opportunities.
2) Limit All Forms of Borrowing
During periods of economic uncertainty, it’s best to be wary of all forms of borrowing as repaying those debts could become problematic if you lose a job and remain unemployed for a long period of time.
With the jobs market so competitive, many people are considering going back to college to improve their educational credentials and move up the corporate ladder. Getting a college degree is fine, but right now getting into college debt isn’t. The same is true of buying a more expensive home and taking on a bigger mortgage, financing a new, expensive car, or even just opening a rash of new credit cards.
All of these are debts that must be repaid and if you can’t do so consistently, without fail, you could be setting yourself up for problems down the road in the job market because employers are increasingly using credit checks to determine who to hire and promote.
3) Consider Entrepreneurship
If businesses don’t add to their payrolls and you’re out of work for a prolonged period, why not make up your own job? I often tell people considering entrepreneurship that it’s sometimes easier to find a client (as a small business owner) than it is to find a job (as an employee).
Making the leap from employee to entrepreneur, of course, is no easy task. But surveys consistently show that millions of Americans — especially many minorities — would love to quit their jobs, and start their own companies.
Unfortunately, fear is one of the biggest factors holding back many would-be entrepreneurs. Not to mention, worries over finances. But if more people would take the entrepreneurial plunge — by pushing past their fears and not buying into the notion that only a “regular job” provides for economic security — then high rates of unemployment would be less worrisome for these individuals.