How to Adjust Your Budget If You've Been Laid Off

Highlights:

• A job layoff can cause financial uncertainty and could be longer than expected.
• Reviewing your current spending and adjusting your budget can help during a layoff.
• If you think you may miss payments, contact your lenders to see if they can offer any help.

During economic uncertainty or large changes to an industry, layoffs can happen. Regardless of the job economy, there is always a risk of layoffs. Being laid off is not only an emotional shock, it can also impact your financial stability. You may not know how to manage your finances if you've been part of a layoff, furloughed or taken a pay cut.

What's the difference between a furlough and a layoff?

Being laid off means you are no longer employed. A furlough means you are on a temporary leave from a job without pay. A furlough can be for any number of reasons. These could include medical or family leave, extended time off, or a slow down at a business. While different situations, both of these can impact your finances. Your focus will be on the impact and finding ideas for how to save money when unemployed or on leave without pay.

What are five ways I adjust my budget if I was part of a layoff?

These five options can help you adjust your budget when you're facing a reduced cash flow.

1. Look at your current spending and savings. It's helpful to look at your current cash flow. Track where you spend money and separate those into two categories: needs and wants. Needs are things you can't live without, like housing, food and utilities. Wants are things you can give up for now, like shopping, subscriptions and takeout. Determine how much you can afford to spend, and try to save the money, if there's some left over. Next, figure out how much you've saved up. Try to plan out how long these funds could cover your lost income.
2. Estimate your new monthly cash flow. After you review your current budget, account for any other money that can come in. This could include unemployment or disability benefits. It can be hard to predict when these benefits will reach you. But, it's still important to know how far that money may stretch to help you better prepare.
3. Determine where to make cuts. An important step is to figure out how to save money when unemployed. Now that you better understand your finances, you should be able to determine where you can cut back. You may already be holding off on major purchases and extra spending. You should still see where you can reduce costs even further. Think long and hard about each nonessential item you consider buying. Try to stay focused on your long-term goal of protecting your finances.
4. Explore your debt repayment options. If you may not be able to repay your debts while also keeping the lights on, reach out to your lenders. Ask about debt repayment options and plans you qualify for. Lenders may offer a variety of options for struggling borrowers. This can include deferred payments and forbearance agreements. Easing your debt burden, even for a few months, may buy you enough time to recover. It can offer an alternative for how to save money when unemployed. You never know what may be available until you ask.
5. Consider other alternatives. If these other options aren't enough, you may need to take more drastic action. Consider reaching out to friends and family members to ask for a personal loan. They may be willing to offer you more agreeable terms than a traditional lender. If you're a homeowner, you may want to take out a home equity loan or a home equity line of credit. As a last resort, consider withdrawing from a retirement account. If you decide to tap a traditional IRA or a 401(k) account, you may owe tax on the withdrawals. You may also have to pay a penalty for withdrawing your money early. Roth IRAs allow you to withdraw contributions tax- and penalty-free after five years. There are exceptions to that rule, so read the terms and conditions.

How can Equifax^® help me live my financial best?

You may not be able to control a job loss or a pay cut. But, you do have the power to change your budget to stay on top of your monthly bills. With the advice provided above, you can weather the storm until you get to calmer waters. If you are dealing with financial uncertainty, it is important to stay on top of your credit scores. Equifax Core Credit™ is a free tool available to you. With Equifax Core Credit, you can view your VantageScore^® credit score at any time. This credit score is a VantageScore based on Equifax data. A VantageScore is one of many types of credit scores.