The recent federal government shutdown was a nightmare for the country, but for federal employees, surviving a temporary loss of income made a bad situation even worse. The fact is, a temporary loss of income can happen to anyone at any time. With an unstable economy, layoffs and terminations are more common now then they ever were. While some employees may be able to see a layoff coming, in many cases, employees are usually in shock when they are told that they are being laid off or let go permanently. This is why financial planning is so important if you want to survive.
The best defense is a good offense. For those who have an emergency savings account, a temporary loss of income will not be as traumatic because basic needs such as mortgage payments, car payments and living expenses can be paid from emergency funds. However, even without any emergency savings, you can still survive a temporary loss of income.
After the initial shock, sit down and revise your budget. Instead of waiting until you run out of money, cut out all non-essential spending immediately. Anything that is not an absolute necessity to live can wait until your income returns. Prioritize all bills – - cover housing, utilities, transportation and food first. It is better to tighten your belt immediately to make the money you do have last longer. Contact unsecured creditors to ask about any relief that they can offer such as delayed payments, interest only payments, etc.
Think about ways you can supplement your income. If possible, find a temporary or part-time job to keep some money coming into your home. You can have a garage sale or offer to barter with friends, family and neighbors for services. Even hobbies can be turned into cash – - sell your products online or at flea markets. Try to avoid tapping into assets such as retirement, college savings, life insurance funds, etc. if possible. These should be last resorts after you have exhausted other ways of earning money.
The best way to survive a temporary loss of income is to prepare for one before it happens. Start planning now with an emergency savings account and a secondary stream of income (maybe from a hobby). Rainy days come in all shapes – not just furloughs.