Tips for Dealing with an Unexpected Loss of Income
by Lila Quintiliani, AFC, Military Saves Assistant Coordinator
There are some drops in income that can be predicted (kids going off to college, retirement) and then there are others that just blindside us (loss of a job, furlough). The important part is to keep a level head and keep as much control over personal finances as is possible in the situation.
- Assess the situation – It’s best to do a “triage” budget and find out expenses and income. Even if there is a spending plan in place, it’s still helpful to do an assessment of current finances and figure out which bills must be paid and in what order. While all bills are important, shelter, food and transportation are necessities. In general, loans that are “secured” with collateral (a house, a car) are a higher priority than those that aren’t.
- Cut back wherever possible – I’m not talking about lattes here; at this stage, with a dramatic loss of income at hand, it becomes necessary to get more drastic. If you are making extra house, car or debt payments, you may consider temporarily paying only what is due. Can cable be dropped? If there’s a contract, can it be dropped to the lowest tier (the same holds true for a cell phone)? Can you give up going to a professional stylist? Turn up the thermostat in your house? Not eat out at all? Do away with music lessons for the kids? Desperate times call for desperate measures. But it’s important to remember that the cut backs are only temporary.
- Talk to a professional – Active duty military, retirees and Department of Defense civilian employees may have access to a wide range of resources on military installations. While only active duty military and their families are eligible to access the financial counselors at Military OneSource, most installation family readiness centers will provide retirees and civilian employees with some sort of financial counseling and information. Another great place to get free financial counseling is at the local cooperative extension office. Some banks and credit unions also provide counseling for their customers.
- Don’t just stop paying bills – while it may be tempting to not open the mail when it arrives, the worst thing to do is to ignore bills and invoices. If there is a chance you may fall behind on any of your payments, it is important to give the creditor a call explaining the situation. Sometimes they will temporarily cut interest rates, waive late fees, or tack missed payments on to the end of the loan.
The Federal Trade Commission has a helpful article on their website on coping with debt. Of especial interest is the part on debt relief service and credit repair scams. The Consumer Financial Protection Bureau also has information on debt settlement and recently started accepting complaints on debt collection practices. If you are active duty and facing a loss of income, the first place to turn is your installation’s family readiness center or Military OneSource.
Need help building an emergency fund to help you weather tough times? Take the Military Saves Pledge to receive more information and inspiration.
- Written by Super User
- Category: Blog
- Published: 31 July 2013