UnemploymentMany laid-off workers have found new jobs after the Great Recession as the unemployment rate has steadily fallen. But some are earning less in their new jobs and still face financial struggles.

Michael Lynch, a certified financial planner through Lincoln Financial Securities and president of the nonprofit Financial Planning Association of Greater Fort Lauderdale, Fla., answered five questions on how recently employed-again workers can best move forward financially:

QUESTION: What should the priorities be in getting back in financial shape?

ANSWER: First and foremost, you need a financial plan. People don’t plan to fail, but people fail to plan. Your financial plan should typically include an emergency fund, a monthly budget and a strategy to pay down any debt and take care of things you might have neglected while you were out of work, such as new tires or brakes for the car. If you don’t have a plan, it may be beneficial for you to seek help from a qualified financial adviser.

Q: The Great Recession taught us the importance of an emergency fund. How much should we save in the fund? Where should we put it?

A: A general guideline is to save three to six months of living expenses. Today, however, we are dealing with job insecurity and a still-struggling economy, so more emergency savings — such as six to 12 months of expenses — may be sensible. Credit limits on your credit cards don’t count.

Some advisers favor money markets, but I prefer old-fashioned bank accounts and other accounts that are liquid and FDIC-insured. Shop for the best interest rates, but consider the convenience of the bank you choose. Interest rates are so low today that there’s probably not going to be a big difference between banks, so convenience is important.

Q: How can people improve their finances if they’re earning less money while costs keep increasing?

A: Times are tough, and this is not the time to splurge on yourself. Get serious; it’s about changing your lifestyle habits. Look for ways to trim your expenses.

I like the exercise of keeping a written expense log for 30 days. This log will help you correct bad spending habits, like that daily $5 grande latte. Complete a 30-day expense log every time you feel like your spending has gotten out of hand.

Try to work more hours or take a second job. I’m inspired by our South Florida first-generation workers who know the lesson of each hour spent working is one less hour spent spending — which is a form of forced savings.

Q: Many people may have fallen behind on saving for retirement. How can they get back on track? When do people know they are saving enough for a comfortable retirement?

A: Many people have an insufficient retirement savings plan or, worse yet, they don’t have any plan at all. They figure, “I’ll work until I can’t.” That’s a bad idea. Statistics show that most people end up being forced to retire earlier than expected due to a health issue. So start saving now as much as you can. Try to increase your savings every year.

Q: What should the strategy be for older workers who were laid off? Should they focus more on paying off their house or their debts or putting money aside for their retirement years?

A: For older workers, a limited earning time can be a challenge. They may not be able to fully recover. Those close to retirement age (within 10 years) may benefit from a financial planner looking objectively at the person’s situation.

Some common solutions include postponing retirement, saving more, downsizing the home, paying off the mortgage, or moving to a less expensive part of the country to live.

Source: MCT Information Services