Losing your job can not only be stressful and an emotional time in your life, it can be downright financially disastrous. Not only do you need to worry about finding a new job, you have to deal with making your rent or mortgage payment, and paying all of your other bills. Those other bills include paying off your creditors including your credit cards. It can be very easy to destroy your credit score during this time of turmoil, but it does not have to be. There are some things you can do to prevent damage to your credit score and your finances that may just well help you to cope with your current financial burdens. Here is a basic checklist to follow if you have found yourself out of a job:
Examine your finances
Okay yes you just lost your job, but you should have some assets in place. You need to factor in any funds you have set aside, calculate how much in unemployment insurance you have due, and any other assets you might have such as severance pay, savings accounts and any assets that you can liquidate for cash if need be. You are basically figuring out what you have to work with.
Examine your obligations
Now you need to separate your financial obligations into two categories, must pay and would like to pay. Your must pay obligations include rent or mortgage, utility bills and a food budget, as well as transportation. Next factor in all other debts and expenses, cable TV for example you can likely live without. Credit card debts can be taken care of with minimum payments until you are back on your feet. In this stage you are pretty much doing financial triage, figuring out what expenses and debts you have to pay, and which ones you can eliminate or pay the minimum on. You main priority is to ensure that you can meet your basic needs, anything else is secondary.
Cut unnecessary expenses and create a new budget
During this time you do not need gym membership, dining out, Netflix or any other non vital expenses. Anything you can live without until you find a new job should be cut. Next you need to make a new budget taking all of the above information into account, so you know exactly what you have incoming and outgoing.
Communicate with your creditors
Do not delay talking to all of your creditors. Do this well before you are ever late on a single payment. Arrangements may be possible that can save you from any nasty dings to your credit report. Some loan companies for example like SoFi will pause loan payments while you are unemployed. Some creditors offer “hardship programs” where payments are lowered and even suspended for a limited time. You should have on hand any documentation that you have lost your job, before making these calls, as you may be required to prove it. Make sure you keep up with the minimum payments during this time, if at all possible. The loss of your job may only be a temporary setback, but late payments on your credit report can haunt you for years to come.
Doing the above can help you during this time of turmoil. Keep calm and collected, and implement the above tips. Your goal is to create monetary stability as much as possible, and to limit the damage to your finances. In order to do this you need to focus and be honest with yourself and with your creditors. Ignoring the situation will not do you any favors. Remember the loss of a job is only a temporary setback.