A job loss changes everything. Your financial security and emergency funds that have been saved are now at risk. The stress of how the bills will get paid is at the forefront of your mind. Unemployment no longer lasts 2 years and in some states, the time frame has been reduced to only 12 weeks. This means acting quickly and making sound financial decisions during this crisis can determine the length of time it takes your family to recover financially.
Step One: Be Proactive. In the wake of the 2008 financial crisis, companies are better prepared to help consumers handle financial bumps in the road. Many companies offer to waive fees for a few months and may even waive some monthly payments. While interest will still accumulate, the payments will not be considered missed and hurt your credit. Contacting creditors early in the process will provide more options than waiting for the collection calls to begin. If you choose to contact credit card companies, you will not have access to the available line of credit during the forbearance period.
Step Two: Evaluate Monthly Expenses. If you don’t operate on a budget, now is the time to learn this skill. Go over each monthly payment and decide what is essential and what you can do without. You can generally put your cable or satellite bill on hold for up to 6 months with no fees if you are still under a contract. Reduce services like premium channels and trim down your cell phone bill. Look at your income and try to get expenses reduced to what you are bringing in. This will reduce the amount required from savings. Then watch expenses carefully and track your budget each week to stay on track.
Step Three: Review Monthly Payments. Recurring payments that are automatically scheduled might be reduced by requesting a minimum payment or speaking with the creditor for a temporary forbearance or adjustment. For example, student loans can often be postponed if you have not previously maxed out the benefit. Creditors of your car loans and mortgages will often waive one or two payments to get you through. Stay away from high cost lending like payday loans and title loans.
Step Four: Ask For and Get Professional Help. Social service agencies and many churches have services to provide food, utilities and even housing payments for a few months. You might be able to adjust insurance premiums through the healthcare marketplace to keep those costs down. This is often less expensive than a COBRA plan. If you have a whole life insurance talk to your agent about restructuring payments temporarily to eliminate or keep payments down without losing the insurance. Check with creditors to see if you have coverage for job loss. This could provide payments until you become employed. There also may be unemployment clauses that will enable you to cancel contracts, but you must speak up and ask for information and help.
Step Five: Find Another Job. After a job loss your full time job is to find employment as quickly as possible. This is not the time to hold out for the perfect job. If your unemployment runs out or you don’t qualify, a part time job will reduce the damage that occurs when income is disrupted.
Losing a job creates stressful situations and often requires soul searching at these crossroads. Unemployment can create an opportunity to expand your horizons it can also deplete savings and retirement accounts. If you find yourself struggling to pay bills, it is advantageous to speak with a debt management company before withdrawing retirement funds or other financial moves that may result in long term financial consequences.