After losing a job or getting laid off, you might be confident in your ability to secure new employment quickly. You immediately start the job search; and with your unemployment benefits and your personal savings, you think you have enough to tide you over. However, if the job search takes longer than anticipated, unemployment benefits may eventually run out. This is a frightening time, especially if you don’t have enough in your cash reserve or another income source. Rather than panic, here are a few ways to cope with expiring unemployment benefits.
1. Research to See If You’re Eligible for Other Benefits
Soon, you may no longer qualify for unemployment benefits, but you might qualify for other benefits to reduce your out-of-pocket monthly expenses. This isn’t the time to be prideful. Contact your state’s Department of Social Services to see if you’re eligible for state benefits given your employment and income status. Depending on circumstances, you may be eligible for rent or food assistance. Also, contact your state’s Department of Healthcare Services and inquire about free or low-cost health insurance offered through the state.
2. Eliminate Any Expense that Isn’t a Priority
After a job loss, some people attempt to maintain their old lifestyle. And if you’re receiving unemployment benefits and have cash in savings, this might be doable. However, if you’ve drained your savings and your benefits are set to expire soon, it’s time to face reality.
Being determined to maintain an old lifestyle can further complicate your situation. If you haven’t already, get rid of any monthly expense that isn’t a priority. This includes canceling your cable, getting rid of a gym membership and reducing how much you spend on groceries and entertainment. At this point, it’s all about buying necessities.
3. Get Your Mortgage Lender Involved
If you’re struggling to pay your mortgage, your lender may offer hardship provisions. In this case, you might qualify for a temporary forbearance which suspends your home loan payments for a specified number of months. Or, you may meet the qualifications for a mortgage modification. This is when a lender reduces the interest rate and monthly payment to an affordable level.
4. Notify Other Creditors
Don’t hesitate to contact other creditors, such as credit card companies, your auto lender or your student loan lender. They may also offer provisions for people who’ve lost a job or experience other financial trouble. This can include temporarily suspending monthly payments, or reducing minimum payments.
5. Sell Personal Belongings
You need to drum up extra cash, and you need to do so quickly. Chances are, you have several items of value in your house that you don’t use or need. Selling possessions might be a last resort action, but if you’re serious about keeping a roof over your head, this move can provide extra cash until a job comes your way. You can sell designer clothes or handbags, jewelry, electronics, furniture. Also, this is a good time to think about downsizing. The situation may not quickly resolve itself. If you can’t afford your rent/mortgage or an auto loan, sell and downsize to something cheaper.
6. Tap Your 401(k)
Many money experts discourage taking early withdrawals from a 401(k). However, if a 401(k) or an IRA is your only available source of funds, and if tapping this money is the difference between paying for a roof over your head and losing your home, go ahead and tap this account. The downside, however, is that you’ll pay a 10% penalty, plus income taxes on the withdrawal.
Don’t wait until you’re about to receive your last unemployment check to take action. The sooner you reduce your expenses, downsize and negotiate with creditors, the sooner you can regain a measure of control over your personal finances.
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