How to Manage Your Money After a Job Loss
When an unexpected job loss causes you to lose your financial footing, quickly regaining your balance is key to managing your money in the face of uncertainty. Feelings of fear, stress, and helplessness can be overwhelming if you don't take control of the situation quickly. While you can't force a potential employer to immediately add you to their payroll, you can take steps to improve your situation — starting now!
Redefine Budget Essentials
Paying for necessary expenses takes on a whole new meaning when you lose your job. Certain things you couldn't live without now reveal themselves as conveniences rather than essentials. It's smart to focus on the basics of food, clothing, and shelter, but there's another essential expense you shouldn't ignore. You might be tempted to give it up along with your yard service and unlimited data plan as you prioritize your bills, but this is not one you want to let go.
Don't forgo insurance coverage.
The risk of not carrying coverage during a global health pandemic, or anytime, is simply too high. Check with your employer to confirm how you can continue medical coverage through COBRA or consider state or federal options for health insurance.
Homeowners and auto insurance are two other bills you should also continue to pay. Not only is it illegal to drive without insurance on your vehicle in Colorado, doing so could lead to hefty fines. Accidents, natural disasters, and freak occurrences can happen to anyone at any time. If you don't have insurance to help deal with them, the costs can be devastating — especially when you don't have a solid stream of income.
Regarding auto insurance, Collateral Protection Insurance* would likely be placed on your auto loan if you decide to drop your auto insurance. This would result in a higher loan payment.
Contact Your Creditors
Many creditors have financial hardship programs to help consumers who unexpectedly find themselves unemployed. Talk to a representative from each lender where you have an account balance and let them know about your situation. Some may offer to temporarily suspend payments, while others may reduce your minimum required payment for a set period. Communicating with your creditors early can help you stay in good standing, which is crucial to protecting your credit health.
If you have a loan with Credit Union of Colorado, make sure to contact us if you are facing any financial hardship. We’re here to help you navigate your financial responsibilities, even during tough times.
Seek Alternate Sources of Income ASAP
First, confirm whether you'll receive a severance package, which might include extended benefits coverage (non-COBRA), a lump-sum payment, or both. Depending on the circumstances, your company may also assist you with finding another job. Otherwise, you may be able to find alternative sources of income by:
- Contacting your state's unemployment office regarding your eligibly for unemployment benefits
- Applying for temporary or part-time work to help fill the financial gaps until you secure full-time employment
- Letting friends and family know you're open to new employment opportunities
- Selling items you no longer want or use
While increasing cash flow is your primary goal, there are a couple of things to remember:
- Certain types of part-time or temporary employment can affect your unemployment benefits. Check your state's unemployment insurance office website or contact them directly for details.
- The penalties for accessing funds in your existing retirement accounts can be substantial. Resist the urge to crack open your retirement nest egg to pay for current expenses.
Ask for Help
There are government programs that may help you pay some of your bills. One example is the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which provides financial relief for eligible individuals to pay for telephone service, utilities, and medical care. Organizations in your local community, including churches and other nonprofits, may also be able to assist you with bill payments. Many offer free food pantries as well.
Turn to Your Emergency Fund
Once you've redefined your budget, contacted your creditors, and tapped all available sources of alternative income and financial assistance, it's time to access your emergency fund. Financial experts recommend that households save 3 to 6 months of living expenses in an "emergency fund" to cover unexpected situations, such as a sudden job loss. But even if you don't have a fully-funded emergency account, use any amount you have saved rather than paying bills with credit cards and increasing your debt.
Being unemployed — especially when it's unexpected — is stressful. Remember that it's a temporary situation, and you will get through it. When you take the steps described here, you can bring calm to a tense situation, which can make finding a new job easier.
*Please see your Credit Union of Colorado Notice of Requirement to Provide Insurance form for a complete explanation of Collateral Protection Insurance (CPI).