Emergency Financial Strategy When You Lose Your Job
In a perfect world, everyone would be prepared for every contingency. In reality most Americans have very little saved for either retirement or emergencies. The result is that when the unexpected occurs, it turns into a financial crisis. Figuring out how to stay afloat until you can get hired for a new job, might be the recipe that saves you from bankruptcy.
The following are steps you can take immediately to shore up your finances to weather the storm:
Be Proactive. There is the strong temptation to just let things go. You really don’t want to take the collection calls and certainly do not want to call your creditor before you are late to explain your situation. This high level of denial will result in more collection calls and higher interest and fees due to late payments. Being proactive by working with your creditors can prevent the situation from getting worse.
Review your budget. Take a hard look at income and expenses. Will you be down to one income? Will you receive a severance or unemployment? Use these figures to adjust your income. Then evaluate every expense and see if there are areas you can cut back. Eliminate cable, reduce your cell phone plan, and stop eating out. Now is the time to pay essentials and let go of anything that is not a necessity. Separate expenses based on importance with housing and utilities taking the highest priority.
Seek help from agencies. There are a number of agencies that can help with necessities like paying utility bills and assistance with food, if needed. Other agencies might be able to help with your housing payments for a short period of time. For each of these services you must qualify for aid. Contact companies with whom you have debt. Many now offer a few months without payments. This is especially true for student loans. Understand that if you contact a credit card company and they offer a short forbearance (time with no payments) you will not be able to use the card during this time and interest will continue to accrue.
Review reoccurring monthly payments. Another priority should reducing or eliminating ongoing payments. Review insurances like health and life insurance. If Cobra is too expensive, seek a higher deductible private insurance. Cancelling these without an alternative can lead to further financial troubles if you have an accident or health crisis. Review all your policies including home and auto. Can you afford to raise the deductibles to lower premiums? If you have a whole or universal life insurance you may be able to skip some premiums and still keep the policy active. Evaluate monthly subscriptions and optional services that can be eliminated. For medical prescriptions contact the manufacturer. Many have programs to help those with financial needs.
Find the next job.
When you are out of work, your full time job should be getting the next job. It may be necessary to take part time work, until a better paying job comes along. A job loss is one of the most stressful events that can occur and being diligent in the pursuit of the next job will keep discouragement and depression at bay.
Cutting back expenses will enable your budget to stretch and reduce the need to take from your savings. If you do not have enough savings to cover the monthly gap, it may be necessary to work with a debt management company to address any unsecured debt. This can help to keep payments down and prevent collection calls from adding stress to an already stressful situation.