Being broke, unemployed, and in debt simultaneously is an experience that many do not want to go through. It can make a person desperate and stressed, especially if they have a family to provide for. Even if a person has savings built up and is not in debt, being unemployed is not a good feeling when you are used to being a breadwinner.
Though panicking seems like a reasonable response to being in such a situation, it is the worst thing you can do because it doesn’t allow you to think clearly. Once you process the fact that you’re losing income, you should come up with a plan to replace the lost revenue.
That could be saving money on expenses by getting unemployed car insurance, picking up contract jobs with Instacart or DoorDash, or by pulling from your savings account until you can find another job.
No matter what your solution is, you need to get a better grip on your finances immediately. This means tracking your debt, monitoring your expenses, keeping track of your credit, and even limiting your spending as much as possible. The best thing that can help you do all this are various financial tools.
1. Calculate Your Expenses With a Budget Spreadsheet
The first step you should take when trying to manage your funds is by notating everything within a budget planner. Doing so will provide you with a clear visual aid of how much money is going out of your bank account and where it is going every month.
Once you put all of what you spent money on within a month into the planner, you will have a good idea of where you are spending unnecessary money. Knowing where you are wasting money is vital because you can stop hashing out those funds and use them as a supplement to your income.
Beyond that, the budget planner will help you to reconfigure your finance. As a general rule, your monthly budget should be shaped within the 50/30/20 money management model.
This model states that 50 percent of your income goes toward all household needs, 30 percent goes toward the household’s wants, and 20 percent goes toward debt and savings.
The planner helps you to identify which expense is a need, a want, and debt. Once you identify those categories from your monthly transactions, you can see how much-lost income you need to supplement to stay afloat. You do this by adding the monthly costs of your needs with the minimum amount you can pay to keep up with debt.
2. Use the Debt Payoff Calculator to Manage Debt
As mentioned above, you need to figure out the minimum amount of money you can put toward your debt. The point of doing this is to avoid late fees, having your credit score drop, and having creditors trying to garnish the little funds you have left.
Paying the minimum amount keeps creditors off your back, which relieves a lot of stress from you, and it prevents you from going too deep in a bad financial situation while you have no income.
Once you have replaced your lost income, you will be able to grow back stable at a faster rate compared to how long it would take if you did not pay anything back to creditors.
If you do not have a savings account to supplement your income, you will have to pick up odd jobs until you find stable employment that replaces your current income. There are various independent contractor jobs available these days that take little to no time to start earning.
The majority of these jobs require you to use your personal cell phone and car, so educating yourself on the local cell phone driving laws may be in your best interest before starting these forms of gigs.
Another alternative you can try to keep income flowing while you are in between jobs without having to work odd jobs is finding out how to apply for unemployment insurance.
Dave Ramsey, a personal money management expert, suggests using the debt snowball method to pay off debt. I believe this method is beneficial when income is low or nonexistent. The debt snowball method consists of paying your smallest debts before your larger ones, despite the interest rates.
First you have to figure out which loan to pay off first. You pay your smallest debt first, then add what you were paying toward that debt to the next smallest debt. You continue this process all while paying the minimum amount for each debt until all debt is paid off.
Focusing on the smallest debts first makes managing them less stressful while unemployed.
3. Monitor Credit With Credit Karma
No matter how difficult things get financially, you want to try your best to keep your credit score at a reasonable rate. It is harder to raise your credit in comparison to how easy it is for it to plummet.
Credit Karma is a useful credit monitoring tool to use during this time because it is free and close to accurate. Individual scores may fluctuate compared to what they may actually be, but the site gives you a general idea of where your credit score falls on a scale of 300 to 850.
It may be tempting to make purchases with a credit card to avoid spending the little cash you have left, but it is not wise. Credit cards are the easiest way to damage your credit score. Working independent contract gigs to bring in temporary income is more ideal than using a credit card.
However, if you find that you need to rely on credit, you should consider applying for new credit cards that offer 12 months of zero percent interest. Doing so will help keep accrued interest from making matters worse.
4. Set up Automatic Bill Pay Services
Similar to not allowing your credit score to plummet, avoiding or forgetting to pay your bills can negatively affect your credit score and can make your debt worse than what it is.
The goal for the time you are unemployed is not to allow yourself to end up in a worse position than you started at the beginning of unemployment.
Your bank account should offer a free bill pay service that comes with your membership. Activating this service prevents you from missing payments and from forgetting them.
Navigating the Unemployed Life
Though unemployment sucks, there is no doubt that you can get through it, especially if you use the tools above.
Throughout this journey of unemployment, it’s essential to know that you’re doing the best you can, especially during a pandemic. If you are unemployed because of COVID-19, keeping track of coronavirus legislation can help in case the government offers more assistance to those affected by this pandemic.
