How we deal with a job loss could mean the difference between a short-term setback and a financial meltdown. I found these helpful tips from Consumer Credit Counseling Service (CCCS) of Palm Beach County and the Treasure Coast. Some of the suggestions also apply if: 1) you already have a job; 2) are self-employed or 3) suspect that a pink sheet will soon be landing on your desk.
I especially like the first tip. I believe in diversified income sources. I've seen too many employees (ages 20-something to 50-something) who have been let go without much warning.
- "Look for potential sources of additional income. If you have more than one wage earner in your household, look for opportunities to earn additional money through overtime. To help sustain your finances while you look for your next job, consider taking on part time or seasonal employment—it can provide both extra money and flexibility to go on job interviews.
- "Contact local temporary agencies," suggests Christina Harrison, a certified credit counselor with CCCS. "They will match your skills with temporary employment available in your area. Some temporary assignments may also lead to full-time employment opportunities." Other industries that can provide quick employment include retail and food service, where training times are relatively short and schedules are somewhat flexible.
- Review your budget. Take a realistic look at your monthly expenses and identify areas that can be reduced or eliminated. Entertainment costs are easiest to eliminate—skip lunches and dinners out and rent movies instead of going to the theater.
- Review your cable and cell phone plans to see if the cost can be reduced. Consider foregoing them altogether—there may be a fee to cancel a contract, but it will likely be much less expensive than having monthly fees, late fees, and interest building up over time.
- Prioritize expenses. After adjusting your budget, if you still can’t cover your monthly bills, pay the most important bills first. Your mortgage or rent payment should be the top priority, followed by car payments, insurance premiums and food. Notify your creditors right away if you are unable to make the minimum payments due on credit cards or other revolving credit. You may be able to get your interest rate reduced or your payment plan modified.
Even if you can’t make a full payment, Harrison suggests paying something toward the debt. "Deferring or skipping payments increases the debt, extends the life of the debt, and will likely result in quickly mounting fees." - Try and avoid incurring any new debt. Resist the temptation to take cash advances on credit cards or to do business with small loan retailers, many who charge astronomical interest rates on the money they lend. While a home equity loan may help create a temporary cash flow, it has long term implications and is not recommended. If possible, avoid tapping into retirement accounts or your 401K, as the significant penalties and tax implications may far outweigh the temporary financial benefit.
- Seek help. Utilize community resources to help bridge the gap. Emergency assistance for your utility bill may be available, and local food banks can help provide basic necessities. Contact your local United Way or your local 211 Information and Referral Service (dial 211) for information on emergency services available in your community.
- Look into unemployment benefits. If you are unemployed through no fault of your own, you may qualify for unemployment benefits. The U.S. Department of Labor website has helpful information about qualifying and requesting unemployment benefits.
- Plan for the unexpected. Even if you haven’t lost a job, it is a good idea to create a savings plan now that will help financially prepare you for any potential life-altering event. Make saving part of your budget, and set aside a portion of your income in a savings account until you have at least 3-6 months living expenses.
- Work now to reduce and eliminate your debt and strive to maintain a budget that doesn’t involve spending more than you make. While it may not take away the pain that comes from losing a job, it can certainly provide peace of mind during a very stressful time."
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