7 Strategies for Getting By Without a Paycheck
You will probably need to make your money last when the unexpected happens. With the U.S. Congress and many state legislatures engaged in budget standoffs, legions of employees are bracing for the possibility they’ll be furloughed or forced to take an unpaid leave of absence.
As this economy has proven during the past few tumultuous years, there’s no such thing as a safe job.
Even if you’re gainfully employed, the current economic climate underscores the need to always be prepared for a financial setback. If you find yourself in a bind, here’s how to get through those gaps between income — no matter who signs your paycheck.
1. Suspend spending.
“Take a good look at where your money is going and cut back on nonessentials, paying special attention to recurring monthly expenses, such as gym memberships or movie subscriptions,” says J.J. Montanaro, a CERTIFIED FINANCIAL PLANNER™ practitioner at USAA.
Some continuing expenses, even if they’re not eliminated altogether, are still ripe for savings. For example, consider dropping some channels from your TV package or shedding some bells and whistles on your phone plan. USAA® Money Manager, a personal budgeting tool, can help you track where your dollars go.1
2. Ease back on some good habits.
“Although aggressively paying off debt is admirable, this may be a time when you should preserve cash by sticking to the minimum payment instead,” says Montanaro.
If you’re feeling pinched, it also might make sense to temporarily suspend automatic contributions to IRAs or trim your spouse’s employer retirement plan contributions. Just be sure to restore them when your income bounces back.
3. Talk to your creditors.
In addition to avoiding taking on new debts, it’s important to be proactive about the ones you already have.
Before you’re forced to make less than the minimum payment on any of your debts, contact your creditors. “They may offer you options that give you some breathing room while protecting your credit score,” says Montanaro.
Check to see if you qualify for flexible payment arrangements, short-term loans or deferred or temporarily reduced monthly payments. Your lender also may allow you to skip a payment and add it to the back end of the loan. Speak directly with your lender and confirm that you won’t be reported to a credit agency or penalized for skipping a payment. If you don’t speak to your lender, don’t skip payments.
Electric and other utility companies also may work with you to help you through the tough times.
4. Borrow with caution.
Ideally, taking cost-cutting and budget-trimming steps will help you avoid the need to borrow money to make ends meet. “If you feel you have no other option, try to use the lowest-cost borrowing options available to you,” says Montanaro.
Before piling up balances on a credit card, consider borrowing against your home equity or taking a loan from a cash-value life insurance plan. A 401(k) loan may be a viable choice, but keep in mind that the federal Thrift Savings Plan doesn’t allow loans if you’re not collecting a paycheck.
“No matter what, avoid debts like high-interest payday and vehicle-title loans,” says Montanaro. While they may seem to provide a quick fix, the costs and interest can be astronomically high.
5. Create some new income.
While it may be difficult to replace all the income from your regular job, think about looking for quick cash both outside and inside your home.
Seek part-time work through a temporary placement agency, job-posting websites and classified ads in your local newspaper’s print and online editions. Check with friends and family for temporary opportunities.
Closer to home, consider helping out your wallet and neighbors by tutoring children after school, walking dogs or being a sitter for babies, pets or houses.
Look around your house. If you’ve got lots of clutter and seldom-used stuff lying around, hold a yard sale to turn these things into quick spending money.
“If you’re on furlough, check with your employer first to make sure your outside work won’t violate any rules,” says Montanaro.
6. Assess your career.
Some furloughs are merely the result of a political standoff, but others may be a warning flag about the long-term outlook for your job. “If you have reason to doubt your future with your current employer, use this time to weigh your options,” says Montanaro.
7. Go to work for yourself.
With extra time on your hands, consider doing some work around your home that you’d normally pay others to do. That could include yardwork or house cleaning, but this may also be a great time to knock out some modest projects. “Focus on lower-cost items on your to-do list, like painting a room, recaulking your tub or fixing a leaky faucet,” says Montanaro.
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1 USAA Money Manager is not an investment advisory service of USAA.
This material is for informational purposes. Consider your own financial circumstances carefully before making a decision and consult with your tax, legal or estate planning professional.
USAA Financial Planning Services is a service mark of USAA that refers to the financial planning services and financial advice provided by USAA Financial Planning Services Insurance Agency, Inc. (known as USAA Financial Insurance Company in California, Lic. #OE36312), a registered investment adviser and insurance agency and its wholly owned subsidiary. Certified Financial Planner Board of Standards, Inc., owns the certification marks CFP® and CERTIFIED FINANCIAL PLANNERTM in the U.S. which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements