What To Do When You Lose Some Or All Of Your Income

Sometimes sh*t hits the fan. You’ve got a money game plan and you’re feeling good, when the unexpected happens and you lose part or all of your income. Before you break your lease and move onto your friend’s couch, let’s talk about what you can do.

 

What are my options if I’ve lost my income?

1. Reevaluate where your money is going & cut back on spending

Time to get intimate with your numbers if you aren’t already. Take a look at your spending. If you use a credit card regularly you can download your spending for the last month to see where it’s all going. 

 

Once you’ve reviewed where your money is going, look for areas you can cut back on. Bigger flexible expenses, like travel and clothing, are a great place to start. While you’re at it, look for subscriptions and memberships you don’t use. For the things you do use, ask yourself if you can go without it for a few months until your income comes back and things stabilize. You can also pause automated savings for short-term goals (i.e. if you move money into a savings account for travel or gifts each month). 

 

For most HENRYs™ [High Earners, Not Rich Yet], student loans are another big monthly expense. If you’re paying more than the minimum each month and you could use the extra money, consider paying just the minimum. Remember this is temporary and you can go back to paying down the loan aggressively once your income is back up. If you lost your job altogether, your loan provider might let you pause payments. For federal loans, you can ask for temporary relief (look for “deferment”). Most private lenders have options too.

 

While we normally wouldn’t advise this, if things get really bad, and you NEED money for fixed expenses (like rent) you could pause savings into your 401(k) or IRA. Remember to start your contributions back up once your income stabilizes. 

 

2. Use your Emergency fund

This is what your emergency fund was built for. Ideally, if you’ve been following this blog, you have 3 months worth of your fixed expenses on hand. DO use it to cover your essentials like groceries and rent. DO NOT use it to splurge on a self-cleaning litter box. Make sure you have a good sense of how you’re spending money while using your emergency fund. Cutting back on spending will help you stretch your savings further. 

Racking up credit card debt you can’t pay off is a no-go. 

 

If you don’t have an emergency fund saved up, you might consider…. 

 

3. Finding ways to bring in more money

Side Hustle Time. From that guitar you never use to the clothes in a pile on the floor, start selling stuff you don’t need. Think about your skills. What would you consider yourself decent at? Can you write? Are you a master at planning every detail of a trip to Thailand? Do you have a wicked smaht accent? Take a look at UpWork and other sites for ideas. These days, you can get paid for anything from recording your voice to outlining a marketing strategy for a small business. 

 

4. Using debt (as a last resort)

If sh*t hit the fan and you’re in a temporary state of “wtf do I do to pay the bills?” you may have the option of opening a new credit card to cover expenses. Ideally, you’d want to look for a credit card that offers 0% interest for a set amount of time, typically 12-24 months. This “intro” interest rate will allow you to use the card like an interest free loan. The KEY is that you MUST pay the balance off before that introductory period ends. Racking up credit card debt you can’t pay off is a no-go. 


As an absolute last resort, if you’ve been contributing to a Roth IRA or a 401(k), you may have the option of taking money out. For a Roth IRA, you can take the principal you’ve contributed out penalty-free. If you have a 401(k), you have the option of taking out a loan against it. In both cases, you’re losing the opportunity for your assets to grow, which will require you to catch up by contributing more in the future. Again, we don’t recommend this unless you’re really desperate. This is a last resort. 

 

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