The easiest way to determine how much you can afford to spend is to outline an emergency budget.
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Q: I got injured at work earlier this year, and even though I recovered physically, it took a toll on my mental health. I ended up quitting and finding a new job, which unfortunately doesn’t start until September. While that is financially extremely stressful, it did give me time to spend with my mom before she died. Now the grief and financial stress is doing me in. I have some disability benefits that I receive each month, but I’ve had to make ends meet by relying on credit and asking my siblings for money. My car payment is huge, $732 each month, and when I tried to get them to lower the payments, they said they couldn’t while I was off work. It’s about eight weeks before I get my first paycheque. Do you have any suggestions for what I should do to get by a little bit longer? ~Wendy
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A: The time between jobs can be extremely stressful, especially when you’re juggling a lot of bills. Whether you’ve been laid off, quit, or are transitioning to a new role, as the pressure to manage your obligations intensifies, it can feel like your financial stability has been pulled out from under you. There are, however, steps you can take to navigate debt during this challenging time. Here are practical tips to help you regain a sense of control of your finances.
Create an emergency budget
When your income drops, it’s crucial to decrease your spending. This might seem like common sense, but it’s extremely hard for most people to do. The line between needs and wants becomes blurred when we have stable income to keep up with our lifestyle.
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The easiest way to determine how much you can afford to spend is to outline an emergency budget. A short plan is better than no plan, so even if you anticipate that your circumstances will improve in a month or two, living according to an emergency budget will help you recover your financial stability more quickly.
How to Cut Costs for an Emergency Budget
If you can’t decide which expenses are needs and which are wants, consider what would happen if you didn’t spend your money for that item. For rent, essential groceries, medical expenses, and transportation costs the outcome of ignoring those expenses could be dire. Entertainment, eating out, streaming services, top-tier cellphone and internet packages, and other discretionary expenses tend to be more a want than a need, so consider each of those budget categories with the goal of reducing or temporarily eliminating them from your budget.
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When your bare-bones, emergency budget is still too expensive, look for ways to supplement what you need. For instance, when it comes to buying groceries, eat before you head to the store and shop with a friend so that you can share larger packages that are a better price. If you have family nearby, allow them to invite you over for dinner or share the seasonal bounty from their garden with you. No one likes to see a loved one struggling, so being open to help can do you as well as your family and friends well.
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Supplement your income
It can be hard to find temporary side jobs while looking for work, but it’s essential that you supplement your income if you don’t have enough money or support to pay for your essential living costs. The summertime can be an excellent opportunity to earn some extra money. Providing out of school babysitting can be welcome relief for busy parents. House or pet sitting, light gardening or housekeeping, assisting a homeowner with chores or a specific project, and gigs like delivering meals can be a real benefit to your bank account. Resist applying for new credit and avoid taking on more debt. Higher payments will only make it harder to recover when you’re back to work.
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Reach out to your creditors
Once you’ve prioritized your expenses, reach out to utility providers to defer non-urgent bills and payments, such as gym memberships, online subscriptions, or premium apps. Request to put your services on hold temporarily, due to financial hardship, rather than cancelling them outright. Many service providers have options for such an arrangement, so it never hurts to ask.
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Be sure to also reach out to your current creditors as soon as you think you might need help. Explain your situation and ask if there is anything they can do to help. Some credit card companies may temporarily lower interest rates or reduce fees. For a car loan, they may have a payment extension option or allow you to skip a payment. Each lender has their own policies so be sure to reach out to each of them. The sooner you contact them, the more likely it is that they can help. After your account falls behind, your options for assistance from your creditors becomes more limited.
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Once you’re back to work, try to catch up on any deferred payments and top up credit card payments as quickly as possible. Extending the length of a loan by adding payments onto the end comes with additional interest, but it is nevertheless an option during a financially difficult period. To regain control as quickly as possible, it can help to reach out to a non-profit credit counselling agency in your area to explore debt relief options and budgeting help.
The bottom line on getting by financially between jobs
When facing financial struggles, prioritizing essential expenses and payments is crucial. Don’t hesitate to explore options like employment insurance benefits if you qualify or community support where possible. Temporary financial assistance during job transitions can provide relief when you’re uncertain about covering rent, groceries, or medical costs. If you’ve depleted your emergency fund, work to build it back up — or start one — as soon as you’re able to. Emergencies tend to strike unexpectedly, so an ounce of prevention, whether through savings or seeking assistance, is worth more than a pound of cure. Lean on friends and family for support and budget carefully until your new job begins. Being as frugal as possible until you can resume your former level of income will help you to regain stability quickly.
Related reading:
Facing Reduced Income – What to Do Right Now
How to Get Debt Relief from Your Mortgage and Avoid Foreclosure
Avoid an Unexpected Financial Crisis and What to Do If Disaster Strikes
Peta Wales is President and CEO of the Credit Counselling Society, a non-profit organization. For more information about managing your money or debt, contact Peta by email, check nomoredebts.org or call 1-888-527-8999.
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