Whether you just got a pink slip or you’ve been unemployed for several weeks, you may be wondering how you’re going to manage your finances without that paycheck.
Being jobless is stressful enough as it is, so you’ll need to take steps to ward off creditor calls and keep your finances in good shape through the transition. As you continue with your job search, be prepared to review your budget and make some smart money decisions to stay afloat.
Here are some of the most effective ways to manage debt while unemployed.
[See: 10 Easy Ways to Pay Off Debt.]
1. Update Your Budget
Unless you have a job lined up that starts in the next couple of weeks, you’re probably not going to see a paycheck for at least a month. You’ll need to work with the cash you have in hand, so now is a good time to review your budget and cut out unnecessary expenses. Really get in there and pare things down to the absolute necessities, so you aren’t spending more than necessary just to get by. Cancel subscriptions, trim down the grocery bill, eat out less often and find ways to save on gas — at least for a few weeks.
[See: 11 Expenses Destroying Your Budget.]
2. Prioritize Your Debt Payments
Now may not be the ideal time to continue with your credit card payoff plan or to accelerate your student loan repayment process. However, you can still prioritize your payments to ensure you can cover at least the minimum payment on all secured debts to stay afloat — your car payment so you have transportation for your job search, your mortgage so you don’t run the risk of losing your home and any bank loans that you simply can’t afford to default on, for example.
3. Protect Your Credit
Avoid falling back on credit cards to get you by when you have some money stashed away in an emergency savings account. One of the worst things you can do when you need money is to drive up your credit card balances on multiple cards. This is a red flag to future creditors that financial problems are in your history, so you need to be cautious about your credit card usage. Keep credit card balances to a minimum and don’t apply for additional lines of credit. Find other ways to drum up some cash, whether that involves selling items on Craigslist or eBay or borrowing money from a trusted friend or family member.
[See: 12 Simple Ways to Raise Your Credit Score.]
4. Talk to Your Creditors
Being unemployed is a temporary situation; you will be able to take care of your bills on time in the near future. Until you have some job security, however, your creditors will need to know about any delayed or missed payments. In some cases, a quick phone call to explain your situation may be all it takes for them to change your due date or offer alternative payment options. Remember that you won’t lose any points on your credit score or pay a penalty as long as you are making the minimum payment on time. You may need to pay only the minimum payment for a few months until you get back on your feet.
5. Avoid Finance Plans and Cash Advances
It can be tempting to respond to those cash advance offers you receive in the mail or set up a financing plan for that bigger purchase you’ve wanted for a while. When you’re out of work for a few weeks or months, the last thing you need is a bigger debt load. Postpone all of those larger purchases until you start earning again so you can determine whether you can really afford to add those monthly payments to your budget.
6. Talk to Your Mortgage Lender
If you know you’re going to be out of work for at least a few months and foresee running into some financial challenges, reach out to your mortgage lender to find out if your lender can reduce the interest rate or even your monthly payment. Many will be more than happy to work with you as long as they know the payments will continue to come in on time. This can be helpful when you only need some temporary relief from making those high monthly payments during a difficult time.
More from U.S. News
12 Ways to Be a More Mindful Spender
10 Money Leaks to Shut Down Now
10 Foolproof Ways to Reach Your Money Goals
How to Manage Debt While Unemployed originally appeared on usnews.com
