One day you’re heading into work, business as usual. The next, you’re receiving notice that your employment is ending. It could be because your company is facing widespread layoffs or restructuring. It may be something more personal to your position or performance. Either way, you’re out of a job.
In the aftermath it may feel like you’re the only person to ever experience such misfortune, but many people have gone through this process and come out the other end stronger. But fewer than half of Americans have an emergency fund, meaning many people find themselves without a cushion after losing their jobs. Not only does it become difficult to keep up with living expenses in this case, but it makes credit card debt even more dire.
The important thing is that you take the time to regroup—which includes making a plan for your finances.
Cut Your Expenses
Budgeting is always important, but it’s especially so when you lose your main source of income. Evaluate your expenditures and identify what’s absolutely essential like food, utilities, rent or mortgage and transportation. Slash all non-essential spending in the meantime. This might mean canceling entertainment subscriptions, cutting out junk food or taking public transportation more. Streamline immediately so you can hold onto as much money as possible.
Get creative. You may even be able to raise the deductible on your insurance policies to save money on your premiums. You may also find you have objects sitting around your home you can sell for extra cash.
Evaluate Your Bills and Debts
It’s daunting, but the next step is sitting down and auditing what you owe. Only then can you prioritize your bills. Here’s an example from one financial planning expert: “It’s better to push off a medical bill than a mortgage payment.” He also advises letting lenders know about your financial situation before you have to start missing payments. This may help you buy time before your debts go to collections.
Tackling Credit Card Debt After a Layoff
The problem with credit card debt in particular is that interest just keeps building… and building. Lines of credit already tend to carry high interest rates, often upwards of 15, 20 or even 25 percent. The longer you wait to address the situation, the more you’ll keep owing.
There are a few options for addressing mounting credit card debt. One option is to simply keep paying the minimum balance to stay afloat. While you’ll do nothing to pay down interest, you’ll avoid late fees and going to collections. While this is not necessarily a sustainable solution, it can serve as a life raft during financial hardship.
If you’re struggling to keep up with credit card payments, another option to explore is debt settlement. Enrollees in a debt relief program make monthly deposits into an account they control based on how much they can afford. Once they’ve saved up a certain amount, negotiators reach out to their creditors and attempt to settle debts for less. Creditors are often willing to negotiate when the alternative is getting no payment at all. While this won’t put an end to collection calls or keep your credit score intact, it may significantly reduce the amount you end up paying—something that can help out in the wake of a layoff.
Before signing up, look what past and present clients have to say about their experience—Freedom Debt Relief reviews show a very high overall satisfaction rating, demonstrating why this company is an industry leader with over $9 billion settled. This company also offers Consolidation Plus for qualified clients, helping them receive a consolidation loan to pay off their outstanding debts.
If you own a home, another option is to refinance your mortgage. You’ll be responsible for paying off more in the long run, but you’ll be able to take out in cash the equity you’ve built up. You can use this cash to pay off your credit card debts and keep up on vital living expenses until your income resumes.
Dealing with credit card debt and living expenses after job loss is primarily a matter of planning and prioritizing.