With unemployment on the rise, one discriminating factor of the hiring process is under increased scrutiny: checking the credit of prospective applicants. Some states are considering restrictions to this process, which they believe may violate applicants’ civil rights.

USA Today reports that “About 43% of U.S. employers check job applicants for overdue payments on anything from mortgages and rent to credit cards and student loans, according to the Society for Human Resource Management and security consultant Kroll. That's up from 36% in 2004, a Kroll survey found.”

You can imagine how the current rules create a cycle of trouble: A worker is laid off and finds himself unable to keep up with his mortgage payments. His credit score declines due to the delinquency. Prospective employers, who screen applicants by credit, are less likely to hire him, he falls further behind on his mortgage, and his credit declines even more.

One way to avoid this situation is to build an emergency fund while you are working. By saving up six months’ worth of expenses, you’d give yourself at least that long to find another job before your credit started to suffer from lack of income. With unemployment so high, saving even more might make sense, since finding a new job is likely to take somewhat longer.

There are certainly cases where a credit check is a viable part of the application and hiring process. You wouldn’t want workers with credit trouble to handle information sensitive to national security, for example. That situation could make the worker more willing to disclose information for the right price. Most jobs, however, have little risk associated with a lower credit rating. In fact, many people think that a lower credit score will actually inspire harder work and more loyal employees, who need the job much more.

Our credit impacts more aspects of our lives than just the rates we can expect when applying for a loan. Maintaining good credit, or improving bad credit, will have many positive effects. It may even make the difference when you’re looking for your next job.

Should companies consider your credit during the hiring process?

When most people hear the word “budget,” they immediately think of sacrifice and cutbacks. In reality, proper budgeting can actually let you spend much more on the things that are important to you.

The goal of tracking your finances and following a budget is not solely to get you to spend less, but rather to get you to spend better. Once you know where your money goes, you’ll be able to make decisions about whether or not that allocation makes sense for you. While your goal may be to cut back spending by a certain amount, that doesn’t mean that every category will have to face that cut. You can totally eliminate wasteful spending and use the savings to increase spending in other categories.

What’s wasteful to one person is not necessarily wasteful to another. We all know that eating out costs more than cooking at home. But if eating out is something you really enjoy doing, there’s no need to cut back on that expense. To reduce your overall spending, while maintaining (or increasing) your budget for dining out, you’ll simply have to make up the difference in another category. Perhaps with all the time spent out of the house, you’d choose to downgrade from premium to basic cable. That savings could then be added to your category for eating out.

While the goal of budgeting is typically to spend less, or save more, that can often be accomplished without a sacrifice in the amount spent on activities we enjoy. Cutting the things that make you happy will end up doing more harm than good. Using the possibility of spending more on the things that make you happy as motivation to eliminate spending on things you could care less about is more likely to bring success.

In the end, we only have a fixed amount of money to spend each month. By shifting money spent on unimportant things to those that matter to us, our money is put to better use even if the total amount spent remains the same. If the process can reduce overall spending, that’s an added bonus, but it doesn’t necessarily have to be the priority in following a budget.

Has budgeting freed up money for you to spend on your interests?

Optional expenses can be delayed or eliminated, but even necessary ones can be hedged through alternatives. Doing so allows you to pay less now in the hopes of avoiding the greater expense until much later.

I ran into this scenario lately when my cordless would no longer take a charge. I use my drill regularly and it allows me to fix a lot of things around the house that would otherwise cost a lot more to have repaired by someone else. To me, this makes having a working drill a necessity, or at least a want worth indulging. Since cutting back on my expenses is more important of late and I hadn’t planned on buying a new drill, I decided to hedge the expense. A simple diagnosis with a multi-meter told me that the drill and battery were fine, but that the charger was defective. Rather than replace the drill, I simply ordered a replacement charger. For a $5 fix, I eliminated the need to spend much more on a full replacement. It may end up that this course of action costs me more in the long run if the charger doesn’t solve the problem as I expect it to, but it is still worth the risk to me because of the relatively low cost compared to replacing the whole drill.

Many of us hedge expenses all the time. A classic case is repairing an older car that is dying a slow death. With each repair, we weigh the cost versus the amount of additional use it should allow. Eventually, putting more money into the car becomes the more expensive route. Buying a replacement car isn’t cheap either, but it will get us more use for our money.

Though this technique may simply seem like delaying the inevitable, it actually can save you money. By looking at the replacement cost and the new product’s expected lifetime, you can determine whether the time bought by hedging the expense makes financial sense.

When has hedging an expense been the right (or wrong) move for you?

One way to help protect yourself from excessive, fraudulent charges on your credit card is to use a temporary number with a low credit limit. Though your liability for fraudulent purchases is limited to only $50, taking this protective step could minimize the trouble of dealing with fraud.

Many card issuers offer the ability to generate temporary numbers. I’m most familiar with the ShopSafe program from MBNA (now Bank of America), so I’ll be describing that one today. Your card may have different features, depending on the issuing bank.

ShopSafe allows you to generate a temporary credit card number with a credit limit and expiration date that you define. Charges show up on your actual card. The obvious advantage of using a temporary number is the ability to protect your actual card number and limit the damage from misuse of the temporary number.

Suppose you are planning to make an online purchase from a company you’ve never dealt with before. Rather than give them your real number, you would login to ShopSafe and generate a number for that particular transaction. So if the total purchase, with tax and shipping, was going to be $37 dollars, you could create a number with a limit of $37 that expires next month. If the company lost or stole your number, there would only be a small window of opportunity to use the number and no credit available.

Since you can generate as many numbers as you like, you might choose to use a different number for every online purchase. That way, if a fraud does occur, you’ll know which company was responsible. Numbers with longer terms can also be used for recurring payments made online. The process is so easy, and beneficial, that you may choose to use it for all transactions, even those with a trusted site. You probably feel that some companies are more trustworthy than others, but no site is totally immune from hackers.

It may seem like overkill to use a temporary credit card number for every online purchase, given the aforementioned liability limits on fraud and the relative ease with which a stolen card can be handled. Still, when you get so much from a program like ShopSafe with so little effort, using it regularly is clearly worth the effort.

What are your experiences with temporary credit card numbers?

Your personal expense plan is most likely set up on a monthly basis – the majority of your bills (credit card, mortgage, electricity) are monthly, and your income most likely comes monthly or biweekly. Also, if you’ve been keeping up your expense plan for a while, you most likely already spend some time each year looking back at how your investments performed and how much you were able to put away as savings. But what about your plans over the next several months – how can you track those?

Consider corporate budgets, which are reviewed monthly, quarterly, and annually; for publicly traded companies, official financial statements are released to the SEC for each quarter and year. This perpetual cycle of aggregating, analyzing, and releasing financial information forces companies to keep their budget plans squarely in focus, and it allows them to regularly view how they are doing versus short-, medium-, and long-term financial goals.

You can see the value of applying a similar, if slightly less complex, practice to your own financial planning. A review of your spending and saving every three months is a great way to do 3 things:

1. keep track of how you are doing on your goals
2. make sure that your budget still accurately reflects your monthly expenses
3. add flexibility to your goal-setting

Generally, a quarterly review helps you analyze your finances because, while one month may be unusually expensive, three months of data will represent a pattern.

Relying on the calendar year as the start of your quarterly cycle, then, the end of First Quarter 2009 will be March 31st. Plan to set aside a little bit more time than usual at the end of this month, and when you examine your monthly budget, take a look at January and February as well. Were any expenses consistently higher than you had predicted? Were you able to save more or less than you planned? Are you now 25% of the way towards your year-end targets?

Once you’ve analyzed the first quarter, take a few minutes to set some goals for second quarter. These goals can be whatever you like, from reaching a milestone in your annual plan to saving up some extra cash to spend on your summer wardrobe.

What are some goals you could set for next quarter?