How do you prioritize payments after losing a job?
This is a very scary question to ponder on. But it is not unlikely that millions of Americans will be asking this question. According to reports, 67 million Americans are working jobs that have a high-risk of layoffs. The same article revealed that the unemployment rate may go beyond 32%.
If you look at the statistics, you might wish that we could go back to the time of the Great Recession. Back then, more than 8 million people lost their jobs. Now, the coronavirus recession caused 10 million people to file for unemployment by the end of March. It is expected that the number will continue to rise.
When you read these statistics, it’s easy to feel despair. Even if you felt very secure about your job when this year started, there is a very high chance that you are not feeling it right now.
But instead of panicking, you need to make an effort to calm yourself. You need to have a clear head to make plans for your future. It may not seem promising right now, but it will get better. There’s still a long way before that happens, but we will get there.
Right now, you need to focus on what you can do to survive this crisis. Because it’s possible to survive this. It will be hard, that’s no doubt. But it’s not the end of the world. You should not give up just yet. There are many ways for you to meet your payments – even if you have lost your job.
You just have to know how to prioritize payments and other financial obligations.
How to prioritize payments for bills after a job loss
It’s not easy to find a solution for your financial situation after a job loss. What you can do is to take it one day at a time. Right now, your best ally is what you know. Surviving this difficult financial crisis will require you to do a lot of research and financial analysis. If you haven’t done that before, you need to learn right now.
Let’s start by dealing with your most pressing problem – your monthly expenses. Admittedly, this will be your immediate concern after learning that you lost your job.
How will you pay for everything? Well, you need to prioritize payments first.
Here’s how you can do that.
Make a list of all your bills
Take a look at everything that you pay for each month. Take out your budget plan and itemize every single bill that you have to pay for. This usually includes your rent or mortgage. You also have to pay for your utility bills, credit payments (student loans, credit cards), food and grocery budget, insurance premiums, transportation or gas expenses, etc. Try to be thorough with this list. That means you also have to include your savings and entertainment expenses.
You need to list these and include details like how much you spend each month. If applicable, include the due date as well. This will give you an idea of how much you spend each month.
Look at how much you have
Before you can prioritize payments, you should know how much you can afford. That means you need to look at how much your current net worth is.
Start with your savings. How much have you saved? Do you have an emergency fund? These will be a part of your cash reserve.
Then you need to look at your portfolio – if you have one. This includes your retirement fund or any other investment accounts that you have opened. Ideally, you should keep your hands off of these accounts. The recession means the market is down. Your portfolio probably has a low value right now. So if you have to touch this, make sure it’s your last resort.
Finally, make a list of all the things that own that can be sold. If there is a recession, it’s probably hard to sell anything, but you can still try. If you have more than one car, get rid of the other. Retain the car that is most fuel-efficient. Or you can get rid of both – especially if you are still paying off the car loans.
Take note of all these because you can use these to help you pay for the financial obligations you have to pay off.
Talk to your creditors and service providers
Now that you have an idea of how much you can afford, it’s time to talk to your creditors and service providers. Call them one by one.
For your creditors, you need to come up with a repayment plan that you can afford. You need to discuss if you can consolidate debts right now. If you have a lot of equity in your home, you can get a home equity loan. Use it to pay for your debts or hold on to the cash so you can use it to pay for your expenses. Or maybe you can apply for financial hardship. There is also an option to apply for forbearance. Your options will depend on what type of debts you owe.
The same is true for your service providers. If there are those that you can live without – like a cable of phone subscription, it might be time to terminate these. Opt for the cheaper alternatives. See how you can save on your payments.
Prioritize your bills
The final step is prioritizing your bills. By this time, you already know what you usually pay for each month. You also know how much you can afford. And your conversation with creditors and service providers should have given you new terms that will make it easier to pay off.
You now have the information you need to prioritize payments. Start with the payments that you have no choice but to meet. Like your mortgage. If you don’t want to lose your home and if you can use the equity to help survive your job loss, then you need to prioritize this payment. For the rest, your credit cards or student loans, it is easier to make arrangements for these. You can request for reduced payments. Or you can file for financial hardship.
What about your living expenses? This will also be a priority – especially your food and groceries. Always have a plan for what you will spend. Buy in bulk to save on cost. For your food, don’t order take out or dine out. Cook everything yourself. If you plan your meals, it’s easier to stick to your budget and avoid wasting anything.
Any insurance premiums or medical debt that you have to pay – negotiate more favorable terms. Or ask them to allow you to put off payments for a couple of months. The same is true for utility bills. Check the website of the provider and see if they offer payment plans. Then call them to make arrangements.
Make sure you have dealt with all the expenses on your list. This will ensure that you will not forget anything as you prioritize payments.
Where to get the money to pay your bills
Since you have lost your job, it will be harder to meet all your payments over a long period of time. Even if you prioritize payments, there will come a time when your cash reserve will be depleted.
What are your alternatives then?
If you have credit cards, you can use it to pay for food and groceries. But make sure that you will use the card that has the best loyalty rewards. If not for the rewards, choose the one with the lowest interest rate. It is also important for you to keep track of what you are paying for. Use your credit cards sparingly and only when it is absolutely necessary.
If you don’t want to use your credit cards, you can start selling off your assets. It may be time to declutter your home anyway. Explore your home for things that you can sell. What you are not using or what you consider as trash may be valuable to someone else. You can use the profit to pay for your monthly needs.
Consider this carefully before you dip into your retirement fund. Because the recession means the market plunged. And that means the value of your retirement fund probably went down. But if you don’t have a choice, then make sure you don’t get everything. That way, you should be able to recover what you borrowed.
When it comes to borrowing, Congress passed a stimulus bill that allowed retirement plan loans of up to $100,000. You can use that to fund your monthly expenses. Of course, you should not get everything you are qualified to borrow. Get only what you need for a couple of months. And make sure when you get another job, you will put it back.