Lost Your Job? Pay These Bills First
The two most important things to pay for while unemployed.
Last updated: September 27, 2022
Losing your job sucks.
But, wasting what little money you have while unemployed sucks more.
So what should you spend it on? Before we answer that question, let’s ask another one.
What is your primary goal now that you are unemployed?
The answer is quite simple. Find another source of income. (This means a job for most people.)
This also has a huge impact on your purchasing decisions. So, back to the original question.
What do we spend our money on during unemployment?
This answer is also quite simple, though not always easy. If our goal is to find another source of income, then our spending habits must allow us enough time to accomplish that goal.
In short, make your funds last as long as necessary to provide you with life’s basic requirements until you find that income.
Here is what to spend your money on, in order.
- Housing and Utilities
- Internet and Phone
Housing and Utilities
You need a place to stay. Some people may be able to move in with their parents if things get tough, but for the rest of us, we need to pay the costs of housing.
Why is Housing First?
Regardless of what happens in your life, you can’t face much adversity at all without a roof over your head and safe place to sleep. Homelessness will basically destroy any semblance of the regular life you need in order to protect yourself and your family.
In its most basic form, your house or apartment provides
- Physical protection from the elements
- Medical protection from other people (it’s hard to shelter in place without a shelter)
- Clean water and food storage (without spoiling)
- Mental peace of mind that have a modicum of safety when inside
- Basic hygiene (a hot shower without soap is better than no shower at all)
Ensuring your housing is taken care of is job number 1 right now. So how do you do it?
How to Pay Your Housing Bills
Now that we’ve established that housing is the first bill to be paid, how do you go about paying it when you’ve lost your income?
Mortgage Forbearance
In the current recession, homeowners received a big assist in the CARES Act. Part of this $2.2 trillion law is the opportunity for mortgage forbearance. In short, if you have a federally backed housing loan, you can have your mortgage servicer suspend payments for up to 12 months.
Now, this does not eliminate the payments: it merely moves them to the end of the mortgage. For instance, if you take the full 12 months of forbearance, you will end up paying your loan off in 31 years instead of the standard 30.
The hope is that homeowners will be much better off in that 31st year than they are right now (i.e. when they are jobless and without income).
Rent Reduction
If you are renting (either a house or apartment), you can always ask your landlord for a reduction in your monthly rent.
Before you dismiss this idea as impossible due to your existing lease, please realize that contracts are amended all the time. Yes, your landlord can stick it to you and hold you to the full rent amount, but that kind of thing gets around and makes for bad word of mouth.
You need to do a little homework before barging into the leasing office and demanding a rent reduction, so here is some information to get in order beforehand.
1. Realistic rent that you can pay.
Even though you are in financial straits, you can’t just ask for 100% off your rent for 6 months. The landlord will just ask you to leave and find a tenant who can pay at least something for that time. So start with something real.
Can’t pay $2,000 per month, but can afford $1,500? Great! Ask for $1,300 and meet in the middle.
2. Payment history
This will help if you have paid in-full and on-time since the beginning of your lease.
3. Condition of the apartment/history of your time
Remind your landlord that you have taken care of your space and not been a bother to your neighbors (especially if this is actually the case).
4. Current economic conditions
Remind your landlord that even 50% payment from a tenant is better than 0% payment from an empty apartment.
Personal loan
If you need some cash to cover a temporary shortfall, then a personal loan is a decent solution. No one likes to go into debt, but interest rates are fairly low right now. And I’m pretty sure no one likes their kids going hungry just to avoid debt.
Some people may suggest this option much earlier, quoting the fact that it gives you a deadline to find your next job. However, I put this lower on the list for one simple reason.
There’s no reason to pay interest for the privilege of spending other people’s money when you can spend your own money at 0%.
If you don’t have any of your own money to spend, then that’s a different story. But normally you have at least one paycheck’s worth of income still left after you get laid off.
Credit card
Credit cards should be a last resort, as they are basically personal loans with super high interest rates.
The same logic applies here as the personal loan, in that you should exhaust your cash reserves before paying up to 29.99% on a card.
(Note: The one exception to this is if you are already a savant at using credit cards for their points and you have the cash to pay off the card. This will be rare for someone who is unemployed, so don’t think that you are the exception that can swing this little magic trick. Accept that you are the rule and just use your cash.)
Utilities
Many states and municipalities have required utilities to cease disconnections and shut-offs during the coronavirus pandemic.
Government bodies have ordered disconnection suspensions statewide in California, Colorado, Connecticut, Illinois, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Mississippi, New Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Texas, Virginia and Wisconsin. West Virginia regulators are “urging” utilities to suspend disconnections.” — Energy and Policy Institute
As with renting, call your electricity, natural gas, and water companies to discuss alternate payments plans. They might be complete jerks and tell you to pay up, but more than likely they will work with you so you can pay your bill.
Internet and Phone
These two can be combined into a single category of electronic communication, and electronic communication is the mandatory digital currency in a time when no one can physically meet face-to-face.
Communication Is Worth More Than Food
You might be wondering why this is so.
Good question.
Here’s a good answer, which starts with another question.
When was the last time you did a deep dive in your kitchen cupboard? If you’re like most people, it’s probably been several months.
My guess is that you probably have more food than you would expect; it’s just food you don’t want.
And that’s fine when we’re not in the middle of a pandemic-induced global recession. But here we are, right smack dab in the middle of we’re-all-fucked-ville, and you need to accept the fact that you’ll need to eat that can of olives that won’t expire for another two years.
The money you save on food right now extends the amount of time that you can search for and find your next source of income. With 22 million people newly unemployed in the past month, you’re going to need every minute you can find.
How to Pay Your Communication Bills
Internet and phone companies are supporting their customers pretty well during the pandemic, oftentimes with late fees and overage charges waived and cancellation orders, well, canceled.
However, these are only temporary measures and will go away once things get back to any semblance of “normal”.
The main goal here is to pay your bill on time to keep from past charges building up over time and becoming a shackle around your future self’s neck.
So what do you do?
Pay with other savings
If you were able to obtain a mortgage forbearance or rent reduction, use some of the money saved from that big bill to pay your smaller internet and phone bills.
Yes, it would be nice to put that money into savings for the rainier day we all know is coming, but you can’t afford to be without your sole connection to the outside world. Pay up in cash, and you’ll thank yourself later.
Personal Loan
Did you end up having to get a personal loan for your housing? If so, put aside enough to pay for your communications bills until the first payment is due (normally at least 6 months).
This will be difficult, as everyone is tempted to spend money just sitting in their account, even when it’s tagged for something else. But if you pull it off, you will have a return on your discipline 10-fold.
Credit Card
The Internet and phone are the few bills that I support paying with your credit card. They are small enough that paying off the charges won’t be completely insurmountable if put on a card for several months.
That being said, take the same warning I gave above with cash sitting in your bank account. Many people think that just because they have a high limit on a card, it is a green light to spend up to that limit.
Don’t fall into that trap!
Capital One, Citi, and their brethren didn’t become “too big to fail” because of their stupidity; they got there because they knew how to hack human psychology when it comes to finances. So be smart if you use a card.
The Takeaway
I’ll be the first to admit that everyone’s situation is different, with family, employment status, bills they need to pay, etc. So I’m not here to tell everyone how to pay the other bills on their list.
But if you go through the list, I think you’ll find that everything else (except food) drops away after the necessary bills above.
- Gym memberships? No one’s going to a gym for quite a long time.
- Student loans? The federal loan is on forbearance for 6 months.
- Car payments? Eh, maybe, but try refinancing with interest rates so low now.
- Health insurance? Yeah, that’s higher up the list, but only catastrophic coverage. Besides, you can’t pay your medical bills if you don’t have a job.
Best of luck to everyone in these trying times!
