An unfortunate truth is that everyone, regardless of background or education, winds up unemployed at least once. Whether you’ve been laid off due to an economic downturn or left a job to focus on finding work that truly makes you happy, jobless periods are something that we all go through.
Despite it being a part of working life, being unemployed can be a frightening and stressful experience. When you don’t know where your next paycheck is going to come from, it becomes difficult to know how to handle payments for things like rent, gas, or groceries. Luckily, you can make your unemployment period significantly less stressful by being smart about your personal finances. A great place to start is with your credit cards. Here are four tips for how use your credit cards better and smarter while unemployed.
1. Revise Your Budget
The first step to making it through unemployment is to do a complete redesign of your budget. If you have a budget in place, you probably created it when you had a job, but without a steady stream of income, your monthly or weekly spending limit is now out of date. Go back through your budget and split your spending into two categories: necessities and luxuries. Then aim for scaling back or eliminating spending on almost everything everything in the luxury category. You can add those items back into the budget later, after you find a job, but for now, you’ll be living with the bare necessities. Streamlining your budget like this will help you maximize the money you have and avoid any overuse of credit cards.
2. Contact Your Credit Card Companies
One of the biggest mistakes people make while unemployed is missing credit card bill payments — another mistake is not informing the card companies of the reason for those missed payments. If you’re lucky, you might have some money saved for emergencies and will be able to make all of your card payments on time (avoiding increased interest rates and penalties). For many people, though, unemployment comes at the worst possible time and late bill payments become a fact of life. If you don’t have an emergency fund and are faced with unemployment, contact your credit card issuer. Many credit card companies have payment programs in place for hardship.
These programs are why you should your creditors to explain the situation. You might be surprised at how helpful credit card companies can be in situations like these, from providing you with a lower minimum payment each month to giving you relaxed payment deadlines until you get back on your feet.
3. Review The Terms Of Your Credit Cards
When you signed up for your credit cards, you probably read or skimmed a long terms-of-use contract before signing your name and getting your card. If you’re unemployed, now is the time to pull out those contracts and read them over once more, this time in detail. It’s easy to forget about interest rates and various types of fees when you are making all of your payments on time. However, if your unemployment situation is going to push you into making late payments or even missing payments, you want to know exactly how much that will cost you. If you have one card with a notably higher interest rate than the other, consider setting it aside for when you’re back to work, or only using it when absolutely necessary.
4. Make Your Minimum Payments
The most important thing to remember about credit card use when you are unemployed is to make at least the minimum payments on all of your credit cards. You still want to do everything you can to make those minimum payments in order to ensure that your credit isn’t negatively affected. You don’t want a period of unemployment to destroy the credit rating you’ve spent years building. For that reason, making minimum payments on your cards is almost as important as making sure you can afford the essentials you need to stay afloat. You are going to need your good credit rating to buy a house or car, to apply for loans, or perhaps even to get a job. Keeping your credit score healthy is important for your finances in the short term and the long term.
By following these tips and strategies — all while looking for a new job — you should be able to weather your unemployment period without letting your credit cards get the better of you. Just remember: if you use your credit wisely, you can weather the unemployment struggle without having to give up the essentials like your home, car, or groceries. You may have to cut back on certain expenses, like dining out, but this will save you money and help make your unemployment a little easier financially.