Unemployed and Can’t Pay Bills? How To Manage
Being unemployed can cause a host of emotions, including anger, resentment, and fear of not paying your bills.
You might lose your home if you are unable to pay your rent or mortgage. Your lights may be turned off if you fall behind with your electric bill. Your vehicle could be repossessed if you fail to make your car payments on time. These events can not only ruin your bank account but also could damage your credit.
There are still ways to manage your finances after a job loss. These are the steps you need to take to help you manage your money after losing your job.
1. Check if you qualify for unemployment benefits
You may be eligible for unemployment benefits depending on the circumstances of your job loss. The government pays you a paycheck that can be used to pay for basic living expenses, while you are out of work.
The state you live in will affect your unemployment benefits. Illinois residents may receive $1,495 per week for 26 weeks, while Floridians can get $275 per week.
You must be able to show that you were fired or quit your job for the purpose of qualifying. You can’t claim unemployment if you are fired or quit. You can still receive benefits if your job was lost due to a layoff.
It is best to file for unemployment as soon after you lose your job as possible. Your first paycheck from unemployment can take up to three weeks.
2. Create an emergency budget
It’s easy to forget to budget once in a while when you have a regular income. You might get an urge to snack at the grocery store checkout line. You might also go out for dinner once a week in an effort to avoid cooking. You can’t spend more than you have to when you are on an emergency budget.\
You can eliminate any unnecessary spending that doesn’t meet a basic need by creating an emergency budget. Your rent, mortgage payment, car payment (if applicable), insurance, utility expenses, and other bills like loans and credit cards will all be included in your budget.
Your emergency budget should also include food, as it is a necessity. However, it should be managed according to strict guidelines. You can save money by planning bare-bones meals using the cheapest ingredients. The amount you can spend on food depends on how much unemployment benefits you have and what savings you have. This will affect the amount you can pay.
3. Make your minimum payments
You must pay attention to your outstanding debts on credit cards and loans. Although you might not be in a position to pay them off as quickly, you can still make minimum payments to keep your credit score from dropping.
4. Do not ignore student loan payments
Student loans are best kept from default by continuing to make regular payments. Failure to make enough payments on federal loans can result in wage garnishment, which is where a debt collector or creditor takes a portion of your paycheck. You can avoid this by continuing to pay off outstanding student debts.
You may be eligible for an income-driven repayment program if you have federal student loans. Your monthly payments are capped at a percentage of your discretionary income.
Deferment or forbearance is another option that may be available to you. This allows you temporarily to stop paying your federal student loans or reduce them. Remember that interest will still accrue during these periods which could increase your loan term.
Contact your lender if you are unable to renegotiate terms for private student loans due to hardship. These loans may be financeable.
5. Contact your lenders
No matter what type of loan you have, it is important to contact every lender immediately after you lose your job. Many lenders and issuers offer hardship plans that can be used to cover you in an emergency.
To find out what options you have, contact your mortgage company, credit card provider, or auto loan provider.
6. Refinance your loans when it makes sense
You may be eligible to refinance existing loans if you are unable to make any adjustments. Refinancing may lower your monthly payment, the interest rate, or both. Refinancing can help you lower your monthly payments.
Refinancing is a good option if your credit score is strong and you are eligible for lower payments. You might want to avoid refinancing if your monthly payments or interest rate would go up.
7. Transfer your credit card debts to a card with a 0% APR
Find a balance transfer credit card with a 0% annual percentage rate (introductory APR) if you are able. This allows you to transfer your credit card debt to another card that doesn’t charge interest for a set period of time. Typically, this is between 12 and 21 months.
You may not be allowed to transfer all of your credit card debt to the new account. If you have an interest-bearing card balance, pay the minimum amount. Remember that once approved, you will be responsible for any additional credit card balances. You’ll need to adjust your budget accordingly.
8. Side hustle
You don’t have to be looking for a job right now. Instead, look into side hustles that can make you extra money. Side hustles are anything that you do outside of your day job.
However, they may evolve into full-time jobs. You can think of online tutoring, freelancing, and babysitting as side hustles. You might consider delivery of groceries if you don’t have a car.
Are unemployed and can’t pay bills? This is not what you should do
You might feel vulnerable if you have recently lost your job. These may seem like simple solutions but they are best avoided.
- Payday loans: These loans are quick and easy to get, with no credit checks. However, interest rates can reach up to 400% and you will need to repay the money within two to four weeks.
- Raiding your retirement accounts. If you have money set aside for retirements, such as an IRA or a 401k, avoid making a hardship withdrawal. This is theft from your future self. Traditional accounts are still subject to taxes.
Do not let your job loss affect you.
It’s important that you stay focused if you have recently lost your job, or if you are preparing your finances for an emergency. It is normal to feel discouraged. However, it is important not to lose sight of the possibilities of what might happen if you do.
Make a list of your income and prepare your budget for the worst. Then, look for ways to supplement your income such as side hustles or unemployment.
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