Where to find cash, how to prioritize your bills, and ways to get help

It’s difficult to predict if and when you’ll be unemployed. Past layoffs and unemployment have historically been caused by pandemics, recessions, bear markets, corporate bankruptcies, and other calamities. However, we all know that bills never stop arriving. When you’re between jobs and income, you can get help paying the bills by applying for unemployment benefits, using credit cards or a line of credit, setting payment priorities, or enrolling in a state aid program.

Until the emergency subsides and you can return to work, it is helpful to have a plan for handling your financial situation or to know where you can turn for assistance. How to pay your expenses and knowing when you can put them off are discussed below.

KEY POINTS

The first thing to do is fill out an application for unemployment benefits with your state.
A credit card or line of credit on a bank account can be a temporary fix if you’re short on cash.
The government offers several initiatives that can help with money.
Rent, mortgage, and insurance providers may be prepared to work with you by deferring or reducing payments if you show financial hardship.

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Where to Turn for Money

Unemployment Insurance

Unemployment benefits should be your first priority while you are out of job. Contact your state’s Department of Labor, Department of Commerce, or Unemployment Insurance Office to learn about the specifics of your state’s registration requirements. Try searching Benefits.gov for your state’s information if you can’t locate it elsewhere.

Credit Cards

Credit cards can be a hassle if you don’t pay off your balance in full every month and interest fees can add up quickly.

Therefore, carrying a credit card balance for a couple of months may be a viable alternative if money is tight. Choose the credit card with the lowest interest rate first if you have several to choose from. If you’ve maxed out your available credit there, it’s time to go elsewhere. Don’t get crazy; this is about stocking up on supplies for a bug-out location.

Every month, you should make an effort to pay off at least the minimum balance on your credit cards. If that’s the case, some financial institutions (banks and credit unions) would let you postpone your payments without the usual fees. In order to find out what assistance your credit card company offers and how to apply, you should visit their website. Doing so and making the necessary arrangements is best done before the next bill is due.

Debit Cards and Checking Accounts

Debit card purchases are often capped to the available funds in the associated checking account. But if you have a credit line associated with your checking account, you can use that instead of your zero balance.

Overdraft lines of credit, which are another name for checking credit lines, often range from $500 to $3,000 and have high interest rates. Still, it’s an option when other funds are scarce, and if you approach your bank, you might even get an increase in your credit limit.

Retirement Accounts

It’s usually not a good idea to cash out a 401(k) or other retirement account before you really retire. But if that’s where the bulk of your savings are stashed, it could be your best bet. Both loans and withdrawals can be made from a 401(k) account. Neither is without flaws:

Loans: In most cases, a 401(k) loan can be taken out and repaid over a period of five years. Keep in mind that any interest accrued on borrowed funds will now be subject to taxation. Additional fees will be assessed if you are unable to repay the loan by its due date.
Withdrawals: To avoid taking out a loan, you could also just withdraw the funds from your 401(k), but this is typically a bad idea. The IRS may impose a 10% penalty on top of the income tax you owe on the amount you withdraw. An unemployed person facing hardship may be eligible for an exemption from the IRS’s 10% penalty.

529 Plans

You can get your money out of a 529 plan at any time, whether it’s for yourself or a child’s college education. Unless the money is used for approved tuition and fees, you will have to pay income tax and a 10% tax penalty on the earnings.

Paying off student loans can be considered a qualified educational expense in 2019, up to a $10,000 lifetime maximum.

Prioritize Your Bills

You need to set priorities if you have a pile of bills and no money to pay them. Shelter, which includes mortgage, rent, and utilities, and food are likely to be at the top of your list.

Food

Food purchases should be made with either immediate cash or a debit/credit card. If you’re having trouble making ends meet, though, you might be able to get by on food stamps (SNAP) until you land a job.

Rent

You may be concerned about how to keep a roof over your head if you are a renter who is barely making ends meet. You should talk to your landlord as soon as possible about this. It’s possible that your landlord will give you a grace period or accept partial rent payments. If your landlord is a person rather than a major corporation, you should keep in mind that they, too, may be experiencing financial difficulties.

It’s possible that your state offers tenant aid programs. While many of the COVID-19 pandemic’s renter aid programs have ended or ran out of money, your state may still be accepting applicants or have set up new programs.

Mortgage Payments

If your home is secured by a mortgage, you should get in touch with your loan servicer. It’s common practice for financial institutions to grant debtors temporary payment extensions or other forms of assistance. Forbearance allows you to temporarily suspend payments on a federally insured mortgage for up to a year, and up to 18 months in exceptional circumstances.In addition to the Homeowner’s Assistance Fund program in your state, there are other choices for mortgage assistance. You can also contact a housing counselor in your state for further information on available resources.

Car Loans and Leases

If you have a car loan or lease, you should get in touch with your lender or leasing organization. There are a variety of emergency programs available from auto finance firms and other lenders that can postpone payments for a month or more.

Car Insurance

Premium payments may be delayed without loss of coverage by some providers. Find out from yours what choices you have. Avoid the potential disaster that might ensue if you went uninsured.

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Student Loans

If a student borrower is struggling financially, there is assistance available. Federal student loan borrowers with an annual income of less than $15 per hour are eligible for assistance under the Saving on a Valuable Education program. A federal student loan may be forgiven if you meet certain criteria.

The SAVE program officially opened for enrollment on August 22, 2023, under the Biden administration.

The new income-driven repayment (IDR) plan from the Department of Education will take effect on July 1, 2024. Borrowers participating in this IDR plan who have annual incomes of less than $32,805 ($67,500 for a family of four) will not be required to make payments. You are immediately enrolled in the SAVE plan if the REPAYE plan was your primary plan. After the rule takes effect in July 2024, all borrowers of federal student loans will be subject to its payback provisions.

Remember that these regulations pertain solely to federal student loans. whether you have private student loan debt and are having problems making payments, you should contact your lender or loan servicer to see whether they provide a repayment plan or other forms of aid.

Utilities

If you’re looking to save money, visit the websites of your utility companies (gas, electric, water, phone, and internet) to check if they offer any discounts or flexible payment options.

Making at least the minimum required payment on your credit cards and other accounts will help protect your credit score.

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Perhaps now is not the time to worry too much about your credit rating. It may take a hit, but there are measures you can do to mitigate the damage. Get in the habit of paying at least the minimum on all of your credit cards on time every month.

No late payment should be reported to the credit bureaus if your mortgage lender has agreed to a deferment or forbearance of your loan installments.

When the Crisis Is Behind You

When you return to work, you’ll have to rearrange your priorities. Credit card debt should be paid off, starting with the cards with the highest interest rates, in addition to meeting any repayment plans made with creditors.

Consolidating your debts into one manageable payment will help you save money and gain financial stability following a spell of unemployment. Avoid getting ripped off by using a bank or other financial organization you know you can trust.

It is also a good time to begin saving for an emergency fund or to replace an existing fund that may have been exhausted. Keep three to six months’ worth of spending in a liquid account, like a bank savings account or money market mutual fund, to use in case of emergency.

What Should You Do if You Cannot Pay You Bills?

You need to get in touch with the people you owe money to, explain the predicament, and inquire about possible payment arrangements.

What To Do When You Lose Your Job and Have Debt?

Make the minimum payments required and get in touch with your creditors if at all possible. Debt consolidation loans may be discussed with a bank representative as well.

What To Do When You’re Broke and Unemployed?

You may be able to collect unemployment benefits if you’re in need of both money and a job. After registering for unemployment, it’s a good idea to start looking for jobs with signs reading “Urgently Hiring” or “Immediate Hire” and to be open to taking any position until you discover the right one. Short-term financial stability can also be achieved through temporary or part-time work.

The Bottom Line

Many people have to find methods to make ends meet during periods when they are between employment. If you have been regular with your payments in the past, most of the entities you owe money to will be understanding as you recover financially.

Save as much as you can in an emergency fund, even though federal and state governments offer programs to support you in between employment. Also, make use of the resources provided here to work up a strategy for meeting everyday costs during periods of low income.