Steps for Dealing with an Unexpected Loss of Income
There are some drops in income that can be predicted (retirement, multiple kids in college) and then there are others that just blindside us (loss of a job, furlough). In cases like these, even large may eventually run out. It’s important, however, to keep a and as much control over personal finances as possible given the circumstances.
by Lila Quintiliani, AFC®, Military Saves Program Manager
There are some drops in income that can be predicted (retirement, multiple kids in college) and then there are others that just blindside us (loss of a job, furlough). In cases like these, even large emergency funds may eventually run out. It’s important, however, to keep a level head and as much control over personal finances as possible given the circumstances.
- Assess the situation – It’s best to first do a “triage” budget and determine expenses and income. Even if there is a spending plan in place, it’s still helpful to do a reassessment 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, consider temporarily paying only the minimum that is due. Can cable be canceled? If there’s a contract, can it be dropped to the lowest tier (the same holds true for a cell phone)? If possible, cancel subscriptions such as Netflix or Hulu. Can you turn down 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 a 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 a loan. Make sure to note the date and the name of who you spoke with, and whenever possible get promises in writing.
- Know where to turn for help – Before pulling out retirement savings or taking out a high interest loan, know that there are resources out there. Each military branch has some sort of relief organization: Army Emergency Relief, Air Force Aid Society, Coast Guard Mutual Assistance, and Navy-Marine Corps Relief Society. These organizations assist retirees, medically retired, and reservists as well as active duty service members and their families. Installation chaplains may be another source of help. In areas that have no local installation, the Red Cross may be able to assist. There are also a variety of spouse groups and charities such as Operation Home Front that may be able to provide assistance. The Military Family Advisory Network has also put together a link to resources that is searchable by zip code.
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*This article was updated and adapted from a previous post