In the United States many individuals are currently out of work because the government considers their job or business non-essential, or impossible to carry out while maintaining social distancing.
My husband works for a local university and has been home working for weeks now. I honestly didn’t look ahead enough to see how much universities would be impacted, but that became very obvious to me when my husband's employer sent an email that he would have to take 39 furlough days over the next year. Essentially, he is losing two months’ income over the next year.
While I’m still very thankful that he has a job, we had to do some scrambling to make our budget work. Here’s how we’re handling a sudden loss of income.
How We’re Handling A Sudden Loss Of Income
We're using a number of strategies to handle our income loss.
Refinance The House
We bought our house 5.5 years ago, and when the mortgage interest rates dropped last month, we contacted our mortgage broker and started the refinance process. Our refinance will be complete this month and will save us $250 a month on our mortgage. That will be a relief during the next year when our income takes a hit.
The next thing we did was carefully go through our budget to cut any unnecessary expenses. Our budget was already pretty lean, but we told the kids that over the next year, there would be no unnecessary expenses. No going out to eat (something we did rarely anyway), no extra expenses for school. We’re on a beans and rice budget for now.
Save The Money From Temporary Relief Bills
We are blessed that the federal government has instituted a number of measures to protect people during this time. We put our stimulus check in our long-term emergency fund.
Also, while my student loans have been paid off for years, we’re still paying on my husband’s student loans. Rather than continuing to make those payments during the six-month suspension that the president implemented, we’re taking the money that would normally go for payments and also funneling that money into our long-term emergency fund.
Paying The Minimum On All Other Expenses
A few years ago, one of our children had a sudden medical crisis. Unfortunately, some of the bills were not paid by insurance. We also discovered mold in our house and had to have that remediated. We still have credit card debt from that time, but we’ve been slowly whittling away at it. However, currently, we have reduced our credit card to the minimum payment due rather than paying extra on it as we had been doing.
We are funneling all of the extra money into our emergency fund.
Continuing To Grow Our Emergency Fund Is Priority
Prior to this global health and economic crisis, we had been in debt pay down mode, eager to pay off our credit card and remaining student loans. We had a small, one-month-of-expenses emergency fund.
However, my husband and I are both concerned that in another year, we may not be looking at a two-month loss of income but no income at all. To that end, we’re saving as much as we can. Hopefully we can grow our emergency fund to at least three months by next year, ideally six months.
A Sudden Loss Of Income Can Be Tough
No matter your position, this pandemic is likely to affect your finances in some way, as it has ours. We’re on emergency fund building mode. I wish we were in a better financial position when this crisis hit. However, there’s nothing we can do about that now.
Instead, we’re working on shoring up our financial position so that we’re better prepared next year if the worst happens and my husband loses his job.
How has this current crisis affected you and your finances?