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Personal Finance

How to Manage Payments if You’re Unemployed

Losing a job can be a heartbreaking experience. Millions of Americans have already been let go from their jobs due to the devastating economic impacts of the COVID-19 pandemic. If you are among the newly jobless, in addition to the shock of it all, you may worry you won't be able to pay your bills and put food on the table while you're out of work.

While this is a trying time, rest assured there are things you can do and resources available to help you—especially during the coronavirus crisis, when the government is adding safeguards to help Americans who are struggling financially.

Know Your Rights

Depending on your circumstances, you may be eligible to receive unemployment benefits to help you get by until you can find work again. States write their own benefit policies and application procedures, so you'll need to review the rules for your state—the U.S. Department of Labor has a helpful resource for doing this.

And even as the crisis continues to evolve, new policy is being written. Signed in late March, the Coronavirus Aid, Relief and Economic Security (CARES) Act allows states to extend the unemployment benefit period, and expands benefits to include gig workers and the self-employed, who were previously ineligible. It also provides an additional $600 a week in unemployment benefits to recipients.

Lenders and others also are adapting. If you think you may have difficulty making your bill payments as agreed, check to see what your creditors and other institutions are doing to ease financial obligations. The Consumer Financial Protection Bureau is publishing an updated list of resources and protections available due to the coronavirus; Experian is doing the same. In some cases, you'll need to alert your creditors before you miss a payment to be eligible for these benefits.

For example, because of economic fallout from the coronavirus outbreak, those with federal student loans are permitted postponed payments with no interest until September 30. Additionally, homeowners with federally backed mortgages won't be subjected to foreclosure, and if they're experiencing a financial hardship due to coronavirus, they have a right to mortgage forbearance.

Rework Your Budget

While there may be resources and exceptions made during tough times, it might help to act on the assumption that you may not have access to those. If you don't operate on a budget, now is the perfect time to create one to track your monthly expenses and get an understanding of where your money goes. You might be surprised to find that some of your spending isn't essential and that you can tighten it more than you realize.

If you do have a budget, take a close look and figure out what you can temporarily trim during this period of unemployment. You may need to pause discretionary spending, like buying clothes or getting restaurant delivery, until you have consistent income again. Think about any recurring expenses you can temporarily cancel, such as subscriptions, streaming services or your gym membership.

Don't Stop Paying Bills

While you may feel stretched thin during unemployment, try to continue paying every bill that you possibly can. Continue paying at least the minimum payment on your credit card while you're unemployed. If you pay your bills late, or miss payments altogether, it can wreak havoc on your credit score, and could cost you in late fees.

If it's not possible to pay everything on time, you may need to prioritize your payments by importance. Maybe this means ensuring your mortgage or rent is paid on time every month so you don't risk losing your housing, and prioritizing your car loan to ensure your car isn't at risk of repossession. You could pay the least important bills last, such as cable TV or your cellphone, since they pose the least risk to your finances if you pay late. With that said...

Reach Out to Your Lenders and Service Providers

If you suspect you'll be late to pay a bill or won't be able to pay it at all, reach out to the lender or utility service in advance to let them know about your job loss. It's important to communicate with any business you pay regularly, including providers of loans and debts (car loans, credit card debts), utilities (cellphones, electricity) and insurance (car insurance, homeowners insurance).

When you talk to your creditors, ask if there are any hardship options available for customers like you who are struggling to pay your bills due to unemployment. During some widespread crises, like natural disasters—or right now with coronavirus—creditors often proactively offer more flexibility to impacted consumers. Sometimes these benefits aren't distributed automatically, and you must call your providers to find out if they can offer any temporary help.

Even if you think you will be able to pay your bills on time, but will be cutting it close, it might still be worth inquiring about flexibility to give your budget more wiggle room. You may be able to negotiate for assistance such as delayed bill due dates, lower payments or loan forbearance, which gives you temporary relief from paying the loan if you're falling behind. Make sure you understand the specifics of the agreement, such as if you'll still be charged interest or your term will be extended, and get it in writing.

Consider Debt Consolidation or a Credit Counselor

If you're struggling to manage your debts during unemployment, one possible solution is to consolidate your debt. This is when you consolidate multiple debts (usually credit card debts) into one lower-interest form of debt, such as doing a balance transfer to a 0% APR credit card or a personal loan with a lower interest rate.

If that's not enough relief, you may want to seek the help of a nonprofit credit counselor. The National Foundation for Credit Counseling is a nonprofit organization that can connect you with an expert you can trust. Your counselor can work with your creditors and help you make a debt management plan (DMP) to get your finances under control. They can also help you make an emergency budget and a financial action plan.

Accounts included in a DMP a credit counselor creates for you will include a statement that they are being repaid through credit counseling; this statement will not negatively affect your credit score. However, if repayment of the debt for less than originally agreed was negotiated as part of the DMP, the account payment status may be reported as "settled." A settled account is considered negative and will hurt credit scores. For-profit debt settlement firms may offer to negotiate settlements with your creditors as well; however, they can be risky and expensive. Before agreeing to such a plan, make sure you understand the costs and consequences.

Boost Your Income

If you've taken some of these measures and are still worried about making ends meet, consider finding other ways to obtain income during this time. Right now, while millions of Americans are losing their jobs, some businesses are hiring like crazy.

For example, many grocery stores and in-demand retailers such as Amazon and Walmart are hiring thousands of workers. Gig economy jobs have also proven lucrative for some. Drivers for restaurant or grocery deliveries are newly in demand as people remain homebound.

If you're not able or willing to take the risk to your health by working outside your home, see if you can find any online work, such as becoming a virtual assistant or doing freelance administrative work including transcription, research or data entry. Here are a few websites to begin your search with:

  • Upwork: This platform is popular with businesses and entrepreneurs looking to hire a variety of professionals for freelance gigs.
  • FlexJobs: FlexJobs is a subscription service that can connect you with remote jobs (full-time and part-time).
  • Fiverr: Fiverr specializes in what are called "micro-gigs" that can be done quickly, such as writing a few posts for a client's social media page.
  • Indeed: While many jobseekers may be familiar with Indeed for its traditional job postings, the website can also be used to find freelance opportunities.

Dealing with unemployment and the resulting financial hardship is incredibly stressful and scary, but take a deep breath and know there are numerous resources to help you navigate and survive this tough time.

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