The spread of coronavirus, which causes the disease COVID-19, is creating an unprecedented unemployment situation. In some states, nonessential businesses have been ordered to cease operations, and workers across the country are losing their jobs and income.
A new Ipsos survey commissioned by Newsy found that about a third of workers have lost income in the past week. A similar number (37%) feel they will lose income in the next month. And according to the Economic Policy Institute, 14 million jobs could be gone by summertime.
If you suspect a layoff is imminent, it’s important to prepare for that possibility while you still have an income. Losing a job is scary and stressful, but you can mitigate the damage by taking as much control of the situation as possible now.
1. Slash your budget.
Your first step should be to examine your expenses and look for any nonessential spending you can cut right now.
“Work with a bare-bones budget,” said Kumiko Love, an accredited financial counselor and founder of The Budget Mom. “Establish the expenses you need to live and focus on cutting spending.” Obviously, you have to keep the lights on and feed your family. But you should aim to pause any discretionary spending you can.
“You need to figure out how long you can go if your job is cut back or terminated. Then you can make decisions accordingly,” said Ande Frazier, a certified financial planner and CEO of MyWorth. She suggested pausing gym memberships, canceling streaming services not in everyday use, pausing transportation costs (such as train passes), stopping auto refills or subscriptions, and cutting down on shopping for things you don’t absolutely need.
And don’t feel bad if you need to slow down on your savings goals for the time being. Making sure you can cover your basic living expenses should take precedence over funding your 401(k) or saving up for the holidays.
2. Prioritize your bills.
According to a survey by LendingTree, 44% of Americans are worried about their ability to pay their rent or mortgage during the coronavirus pandemic. Twenty-three percent are concerned about affording their monthly credit card bills. If you lose your job, you may have to make some tough decisions about which bills actually do get paid.
So once your budget is pared down, take a look at the expenses you have left and decide which ones are most important to continue paying if money gets tight.
“Food and housing expenses are essential to cover if you have limited funds, so prioritize allocating your funds to those expenses first and foremost,” said Brittney Castro, the in-house certified financial planner for Mint and Turbo, and founder and CEO of Financially Wise Inc.
Next, Castro said you should call your service providers (cell phone, internet, cable, etc.) and find out what sort of options you have to reduce or pause your payments temporarily.
“Beyond that, you want to protect your credit for the future, so try to keep credit expenses low, and pay your minimum debt payments so you don’t default,” Castro said.
3. Deal with your debt.
Speaking of debt, this is an area of your budget where you may be able to find temporary relief in light of the coronavirus pandemic. Many local governments and individual financial institutions have placed moratoriums on late fees, interest and other penalties for missing payments. In some cases, you may also be able to put your loan into forbearance.
“If you are currently facing or anticipating a reduced income during this time, as a first step you should reach out to your lenders, providers and landlord to preemptively discuss temporary payment relief options,” said Adrian Nazari, founder and CEO of Credit Sesame. “This means that you have the option to delay paying these bills without a negative impact on your credit score or losing service, and allowing you to prioritize paying for necessities like groceries and pharmaceuticals.” Be sure to explain that you’re facing financial hardship due to income loss related to the coronavirus.
Even if you aren’t able to pause payments or get penalties waived, there are a few options for at least reducing the monthly bill.
For example, if you own a home, you may consider refinancing your mortgage. Now is actually a great time to refinance since interest rates are so low ― as long as the math works out, of course. If you qualify to refinance to a lower rate, and you’re able to keep closing costs to a minimum, you could reduce your monthly mortgage payment and save money over the life of the loan. Just be wary of extending the term length, as this will likely wipe out your savings in the long run.
As part of the coronavirus stimulus package, federal student loan payments will be suspended through September 30, 2020. Interest won’t accrue during this time, so you don’t have to worry about your balance growing. However, it doesn’t apply to private student loans.
After that date, another option for handling federal loans is to apply for income-driven repayment. Depending on the program, you can have your loan payments reduced to 10 to 20% of your income. You need to re-certify your income every year on IDR, so if you lose your job in the meantime, your payments should adjust accordingly. In fact, it’s possible to qualify for payments of $0 (though you will still accrue interest). And keep in mind that if you have private loans, your lenders may have similar loan hardship programs available.
Finally, if you’re carrying credit card debt but have a decent credit score, look for a balance transfer deal. In order to attract new customers, credit card companies will offer 0% interest for around 12 to 18 months if you transfer your balance over from a competitor. Though there is usually a fee involved ― around 3% to 5% of the balance ― it’s usually worth it to avoid accruing interest for a year or more. During this time, your payments will go 100% toward the principal, allowing you to pay it off faster.
4. Funnel extra cash to your emergency fund.
Saving money might be out of the question right now, especially if your hours have been cut. But if you have any savings from reducing spending and lowering loan payments, try to squirrel it away into an emergency fund. If you do end up getting laid off, you’ll probably need some cash to float you until unemployment benefits kick in or you find a new job.
5. Start networking like crazy.
The coronavirus is rapidly changing the job hunting landscape. Not only are there fewer jobs available as businesses continue to shutter, you’re now competing against all the other workers who’ve recently been let go or furloughed. Not to mention, in-person networking and interviews aren’t a possibility.
That’s why now is a good time to get ahead on your job search and reach out to some of your trusted contacts to let them know you may be making a career change soon, according to Christy Noel, a career expert and author of “Your Personal Career Coach: Real-World Experiences for Early Career Success.” This allows you to line up references you’ll need as you begin interviewing for new positions.
“It can be easier to secure references when you are employed,” Noel said. Plus, it alerts your network that you might be job hunting soon, so they’ll keep you top of mind as they come across open positions.
However, Noel warned against hitting up your connections for jobs right away. “Reach out to say ‘hi,’ send articles that may be of interest, comment on their LinkedIn posts … Get back in touch so you can reach out to them and they’ll be receptive when the time is right,” she said.
6. Find a side hustle or ramp up the one you have.
Because the working world is changing in the face of coronavirus challenges and becoming more competitive, it may be some time before you’re able to secure full-time income again. “One of the best ways to prepare for losing your job is to start a side-gig that allows you to replace the income that you may soon lose due to an impending job loss,” said Roy Morrison, digital marketing and growth strategist for Meaningful Profits.
Though it’s unlikely that your side gig will replace your full income in the beginning, it’s a great way to beef up your emergency fund. And over time, it might be able to replace your current income or even surpass it. “It is very risky to depend on a single source of income, as it can vanish any day,” Morrison said. “For that reason, I believe working on a side gig to develop a second source of income is the best way to prepare for potentially losing your job. It will give you some peace of mind knowing you have options.”
7. Have your unemployment application ready to go.
When facing job loss, it’s important to use all the resources available to you. That means you should be prepared to file for unemployment as soon as possible.
In light of the coronavirus pandemic, many states have waived the one-week waiting period to receive benefits. Plus, thanks to a new stimulus package, you can expect to receive a larger benefit for a longer period of time.
In the meantime, find out where to submit your claim and have your documentation ready. Castro said if you are laid off, you should file for unemployment insurance through your state. That can be done online; just use the Department of Labor’s list to find your state’s website. There may also be a phone option.
8. Use your health insurance benefits.
While it’s best to avoid visiting the doctor’s office if at all possible right now, there are opportunities to use your health benefits while practicing social distancing. And now is a good time to take care of any pressing health concerns that could turn into more expensive problems if you lose your health insurance and can’t afford your own policy.
Many medical professionals can consult with patients over the phone or by videoconferencing. And that doesn’t just go for your primary care physician. For example, your insurance provider may cover mental health counseling (which in some cases, can even be done online). That could be especially helpful if you’re experiencing heightened anxiety or other mental health issues in light of health fears and the possibility of extended unemployment.