Steps to Take If You Can’t Work
For most of us, an unexpected income loss could be financially devastating. For the 32 million U.S. workers without paid sick time, the idea of missing work because of an illness or a shutdown is daunting. What do you do if you suddenly can’t work and have no income? These steps will help you stay as financially healthy as possible if you experience unexpected income loss.
Organize Your Budget After Unexpected Income Loss
You’ll want to know as much as you can about your expenses if you’re facing an unexpected income loss. If you don’t already work within a budget, start planning your monthly expenses with this worksheet.
Identify and total up all income sources and assets, such as savings that could sustain you until you resume working or replace your income. Review your living expenses and eliminate the things you can live without. Cut back on essential expenses as much as you can.
If you’re feeling stressed by a financial crisis, consider working with a financial advisor who can help with debt management. A credit counselor will listen to your financial concerns and can potentially help reduce the overall cost of your debt.
Explore Remote Work, Sick Leave, and Other Support for Unexpected Income Loss
The coronavirus pandemic has created a mind-shift when it comes to working remotely. Though your company may have previously not permitted telecommuting, things likely have changed. This is good news if you’re healthy enough to continue working and want to prevent unexpected income loss. It’s also a win-win because the company gets the benefit of your continued knowledge and production, and you keep yourself and fellow coworkers safe.
In addition, if you have vacation time, paid time off, or paid sick leave, you can use those benefits to sustain your income during an interruption to your ability to work. If you don’t have any time left or your company doesn’t offer those benefits:
- Find out if your situation is covered by short-term disability insurance
- Ask about emergency leave policies
- Ask about Employee Assistance Programs (EAPs) or other benefits to find out if your employer can connect you with resources for mental and physical health, financial wellness, and other surrounding supportive services
The Centers for Disease Control and Prevention (CDC) and other government organizations are issuing guidance to businesses and employers that recommend flexible sick leave policies.
Government leaders are urging companies to provide paid leave and/or emergency leave, to encourage and enable people who can’t afford unexpected income loss to stay home if they’re ill. Find out if your employer has developed a policy that provides compensation for sick time or emergency leave.
Draw on Your Assets to Help with Income Loss
You may need to pull from your savings or take on short-term debt to help you manage a financial setback. Create a plan for using those assets and refilling your coffers once you’re able to replace income or resume working.
Look to your “liquid” assets first, drawing on cash savings accounts and non-retirement investments to help supplement a loss of income. Working with your budget, determine how much you’ll need to draw to cover your basic expenses. Make a plan to pay back your savings when your income has resumed. Treat your use of your savings and other assets as a “loan” to yourself. Write a repayment plan into your budget as soon as you can replace your income.
Consider whether credit is a feasible option. Taking on credit card debt or personal loan debt will come with interest rates, fees, and a new monthly payment. Look for low interest rates, low fees, and favorable terms, and plan for what a new monthly payment will mean to your budget. Be ready with a payback plan if you do decide to use credit to get through an unexpected income loss. The faster you pay off interest-bearing debt, the less you’ll spend on interest and fees.
Financial Counseling for Unexpected Income Loss
Whether you’re experiencing a temporary disruption to your paycheck, or a longer-term income loss because of job loss, a financial counselor can help you figure out your plan and get you back on the path to financial wellness. They’ll walk you through your personal situation and help you identify options that can relieve stress and make it easier to bounce back.
Content courtesy of GreenPath Financial