Yahoo Finance Money Experts: How To Survive Financially If You Lose Your Job and Own a Home
Losing your job is never easy, but when you have the financial responsibility of homeownership, the stakes are even higher.
If you rent, you still have to keep up with monthly payments, but maybe you can work out a payment plan with your landlord that doesn’t affect your credit or you can end your lease early and move in with family members if needed. Homeowners, however, don’t always have the same flexibility.
They have the added burden of having to figure out mortgage payments, taxes and insurance, let alone upkeep. If your furnace dies during the winter while you’re unemployed, for example, you might not be able to delay shelling out for a new one.
However, there are some steps you can take to survive financially as a homeowner who’s lost their job.
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Utilize Benefits
If you lose your job, you may be entitled to benefits from your employer or state government that keep you afloat.
“If you lose your job, the first step is to take stock of your situation. Make sure you understand any severance or unemployment benefits you may be eligible for,” said Jay Zigmont, Ph.D., certified financial planner (CFP) and founder and CEO of Childfree Wealth.
Don’t be afraid to contact your former company’s human resources department if you have any questions. You can also contact your state’s unemployment insurance office for any needed clarification. Better to spend a little extra time making sure you’re getting your full benefits rather than missing money you’re entitled to.
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Make a Budget
It sounds simple, but too many people fail to make and follow a budget. But if you’re getting by on a fixed amount like severance or unemployment benefits, you need to make sure you’re not overspending and have enough money for housing.
“You must work on a budget that reflects only your needs. Needs in this case mean things you must pay to keep a roof over your head, yourself fed and any required payments,” Zigmont said.
Once you have your necessary expenses worked out, you can compare those to any benefits you’re eligible for and see if there’s a gap.
“You can then figure out how much your emergency fund will cover,” Zigmont said.
Suppose your necessities add up to $4,000 per month and you’re getting $1,500 in unemployment benefits per month. If you have a $10,000 emergency fund, that means you have a four-month runway to keep up with your expenses, which might be long enough to find a new job. But as a homeowner, you may need extra savings for things like unexpected repairs.
While losing your job often means you first dip into your emergency savings, “many retirement accounts will allow one access to the funds in case of hardship; but keep this as a last resort,” said Vijay Marolia, co-founder of The Cash Square and managing partner at Regal Point Capital Management LLC.
That’s because accessing your retirement savings early can derail your retirement planning. Even if you don’t have to pay a penalty for a withdrawal due to a hardship, you could miss out on compound growth and have to do more to catch up later.
Look For New Income
Given that many homeowners don’t have much runway and want to avoid draining their entire emergency fund, let alone accessing retirement savings or taking on new debt, you may need to look for new sources of income, in addition to your regular job search.
“This is where gig work and part-time employment come in,” Zigmont said.
He also suggested reaching “out to your local workforce development board to see what programs they may have for training and job placement.”
Keep in mind, however, that working could affect your unemployment income, so you’ll need to factor that into your budget.
And while it’s not always easy to swallow a job loss, having the financial responsibility of being a homeowner could leave you with little choice but to quickly find new income. The good news is that you may be able to quickly start doing so, such as by selling items in your home while also job searching.
“When you’re calm and alone — either before everyone else is up or after they’re asleep — walk around your home and look at all of your stuff. Do you really need it? Could someone else use it? More importantly, would they pay for it? My point is that you need to start selling yourself as well as your stuff,” Marolia said. “Believe it or not, you’ll feel better as a result and you won’t believe what people will buy.”
Contact Your Lender
Lastly, if you can’t seem to make the puzzle pieces work to afford your home while losing your main source of income, you may be able to find relief by contacting your mortgage lender. Doing so might help in terms of getting assistance like mortgage forbearance, which would enable you to delay payments. But don’t assume this is a fix-all.
“Asking for a mortgage forbearance should be a last resort. With a forbearance, you are just pushing off your payment, not actually lowering it. In most cases, it will also be a negative mark on your credit report,” Zigmont said.
“If you know you are going to have a hard time making your mortgage, you can call your bank and see what options they may have. Forbearance is just one, but depending on your mortgage and servicer they may have other options,” he said.
Still, you want to make sure you’re not trading short-term relief for more long-term pain than you want. For example, refinancing to a lower monthly payment might help for the time you’re out of a job, but it could cost you significantly if it means paying more in interest throughout the mortgage. In that case, you might be better off working side hustles to keep making mortgage payments and slow the drain on your emergency fund.
Overall, losing your job as a homeowner can be challenging, but with the right mix of balancing income and savings versus expenses, along with asking for help when needed, you can financially survive this period. And before you know it, you can be back to work.
“Don’t get down on yourself — today one can get a job fast by utilizing technology, relationships or networks and side hustles,” Marolia said.
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This article originally appeared on GOBankingRates.com: Money Experts: How To Survive Financially If You Lose Your Job and Own a Home
