Losing your job stinks, and looking for a new one can be overwhelming. Add a dwindling bank account, mounting debt, and the fear of losing your home, and you’re bound to be a stress ball in no time. Here’s how to stay off the slippery slope of debt during your unemployment and keep yourself in the green.
1. Have Savings
Obviously it’s too late for this one if you just lost your job, but saving 3-6 months of income, or more, is always a fantastic idea. If you don’t have a budget already, your unemployment is a good time to establish one based on your current bills and necessary spending.
2. Work with Your Creditors
The worst thing you can do about your impossible bills is nothing — call every credit card company and loan servicer to which you owe money to alert them of your situation, especially if you can’t make the minimum payments. For example, to avoid student loan default — as long as you can prove that you are unemployed — you can receive a deferment or forbearance on your payments temporarily. For loans, you may be able to arrange an income-based repayment plan.
3. Cut Back
Your gym membership is nice, and so is cable TV. Losing your home, however, is not so nice, so cut back on extra spending now before the extras drain your dwindling bank account. Exercise at home or outdoors, get a library card, cook at home instead of eating out, rent movies instead of going to the theater, and swap out that tropical vacation for a camping trip. By learning to spend less, you’ll get more creative with how you entertain yourself. Even if you are happily employed, you can always cut back a little, both to develop good habits and establish emergency savings for a rainy day. You can also downsize a bit; sell your extra furniture, clothing, or other nice things you can replace later.
4. Snip Those Credit Cards
You may get another job soon, but the last thing you want is to find yourself unemployed and in a mountain of debt a few months from now. Paying cash for everything will ensure that you remain a bit more careful. If you have an emergency fund, use that to pay your bills, and continue to live as cheaply as possible until you’ve replenished your savings.
5. File for Unemployment
As long as your severance agreement didn’t include a promise to not seek unemployment benefits — and as long as you are actively looking for work (instead of going back to school, taking some time to be home with the kids, or avoiding work to start your own business), you may be eligible for unemployment benefits. Visit your state’s unemployment website to apply.
6. Work on the Side
Until you can find a permanent job again, find gigs that can make you a bit of cash in the meantime. You can make extra cash running errands for people or doing other tasks — search Craigslist or register with TaskRabbit to find jobs helping other people with grocery shopping, cleaning, or other chores.
By saving up, cutting back, working with your creditors, and finding ways to make a little cash, you’ll be on track to keep debt at bay while searching for your next job.
