Losing your job is one of the worst things that could happen, especially in a period when hiring is slow. With the right tools, you can make it through an employment slump, keeping your credit in tact, and continuing to manage your debt.
When you're job searching, you don't want to worry about anything else, least of all your credit and debt. Those two things could play a significant role in making your next career move. Many employers use your credit history as one of the hiring factors. If you suddenly let your credit go after losing your job, your employer could conclude that you're not able to handle high pressure situations.
Get a Temporary Source of Income
As you work on getting a new job, now's the time for some serious planning. First, find out if you're eligible for unemployment benefits. Alison Doyle, About Guide to Job Searching says you might even be able to file for unemployment online or over the phone. Check with your state's unemployment office to find out if you're eligible and whether you must apply in person.
Use your emergency fund to bridge the gap between your unemployment benefits and severance pay (if any). This is the reason you spent months building a solid emergency fund. Use to help pay the bills, but use it sparingly because you don't know how long you'll need it.
If it's taking you longer than expected to get a full-time job, consider working part-time. Or, you can make money from a hobby, sell arts and crafts on Etsy, or start a (low-cost) business of your own.
The article How to Get Money for Your Debt talks about some ways you can get extra money to help fund a debt repayment plan. But, the tips can also help you make it through a period where money is tight.
Rein in Your Expenses
Reassess your budget. You'll need to decrease your expenses to compensate for the decrease in your income. Go through your budget and cut out any luxury expenses. In the beginning it might be hard to talk on your cell phone less often or go without cable television, but you'll adjust. Cutting back will stretch your emergency fund further and keep you from relying on credit cards.
Keep Credit and Debt Under Control
Don't make any new credit card charges. Without a reliable source of income - even unemployment benefits won't last forever - you can't afford to make any new credit card purchases. Resist the temptation to use your credit cards to keep your lifestyle at a pre-unemployment level. It won't take long for your credit card balances to get out of control. Instead, scale back your expenses so you don't have to use your credit card to keep up.
Don't take on new debt. The last thing you need in this situation is another bill. Though you might be tempted to take out a personal loan, now isn't the time. Put off car and home purchases until after you've been gainfully employed for a few months and you've had time to rebuild your depleted emergency fund.
Keep paying all your bills, even if it means making minimum payments. You can pick up with higher payments after you've gotten a new job. Be extra careful not to be late on any payments. Late payment fees are an unncessary expense and make it harder to get caught up.
Recognize when you need help. Ask your creditors and lenders for help as soon as you see you'll need it. You may be able to put some loans on deferment or forbearance, which would reduce or suspend your payments for a period of time. If you wait to contact your creditors, it could be too late for them to do anything for you. Consumer credit counseling is an option if it get hard to make your credit card payments.
You can make it through a period of unemployment and maintain your credit and debt. You just have to make the most of your resources and avoid overtaxing yourself with more debt.
