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Juggling your finances in the best of times can be a challenge and if you find yourself faced with reduced hours at work, a furlough or even the loss of your job altogether, making ends meet can become even harder. Your job future may seem uncertain, but don’t despair—take action. There are practical steps you can take to keep yourself on solid ground and limit the financial impact of the loss:
Take a hard look at your budget
- How much income or savings do you have, from sources such as:
– Unemployment benefits
– Social Security payments
- How much do you owe?
- How are you spending your money?
- Cut back immediately on things that are “nice to have” but not necessities including:
– Cable television
– Eating out
– Gym membership
– Magazine subscriptions
– House cleaning services
– Landscaping or lawn care
Prioritize your bills
- Food, shelter and medical bills should be at the top of the list.
- Which bills need to be paid in full?
- Which bills can be deferred by making minimum payments?
Avoid taking on any new debt
Consider options to restructure your debt
- Could consolidating your debt lower your payments? Debt consolidation might help you save money by lowering your interest rate and monthly payment. It might also be helpful for you track and manage your finances by giving you a single monthly payment.
- If you own your home, would refinancing be helpful to lower your monthly payment?
Once you’ve sized up your financial situation, if you think you may have trouble paying any of your bills—even making minimum payments—call your creditors and talk to them about your situation. Don’t hesitate, call them right away. The earlier you make the call, the more options you will have to protect your credit.
Other important things to think about:
- Will you get a severance (pay and/or benefits often offered to employees who are laid off or retire)? Ask how much severance pay you will receive, whether your health insurance will continue and for how long, and whether your company provides counseling, resume service, retraining or other help in finding a new job.
- Apply for unemployment compensation. Eligibility varies by state, so check your state unemployment office for information to see if you qualify and how long you can receive benefits. And, remember unemployment compensation is taxable income.
- If you lose health insurance coverage, you can remain covered under the Consolidated Omnibus Budget Reconciliation Act (COBRA).
- If you have a retirement plan, you can roll your 401(k) over or transfer into an IRA, leave it where it is or cash it out. Be aware that you pay a penalty for cashing out if you’re younger than age 59 ½ and you’ll pay taxes on the entire amount. To learn more about 401(k)s and IRAs.
How would you pay for an emergency?1
- 60% Pay cash
- 51% Borrow from family/friends
- 29% Take out a loan
- 25% Credit cards
Podcast: Money Management
Learn how to manage your finances better by developing a positive relationship with money.Download How does your relationship with money help you manage it today and in the future? (1.2 MB MP3)
This site is for education purposes. The material provided on this site is not intended to provide legal, investment, or financial advice or to indicate the availability or suitability of any Capital One product or service to your unique circumstances. For specific advice about your unique circumstances, you may wish to consult a qualified professional.
Source: Prepared for The National Foundation for Credit Counseling by Harris Interactive Inc., Public Relations Research, 2010