So you don’t have a paycheck coming Friday? We’re all in this together at least — ‘til the end of the month.
For those in or near this situation of not being able to pay their bills soon, it’s good to have a heads up so you can anticipate what will likely happen, based on the experience of someone who’s been there.
Many are finding out for the first time that when you lose your job in this country and there’s no (more) savings, you are — nearly immediately — in danger of losing your place to live, having your water, gas, or electricity shut off, losing your car, (and lapsing on your car insurance, which will significantly affect any future rate), having your phone disconnected (which may be your only internet connection), and other repercussions they hadn’t even considered.
In the United States, it takes approximately one month for every $10,000 of income to find a comparable new job.
That statistic has held up pretty accurately with my last three job changes, personally. Of course, that’s when we’re in a “normal” job market — all bets are kind of off right now.
I should point out that what people are experiencing in the wake of the COVID-19 Pandemic is not truly representative of how soulless and uncaring this process usually is. To put it another way, because of the Coronavirus, there’s a lot more leeway than usual — believe it or not.
Obviously there are a handful of utility companies, banks, and creditors around the country that have made some extensions or other concessions available to struggling consumers, and we thank them (to the extent they’re reasonable about it). Of course, many programs have recently ended on June 30, or will be over at the end of July.
Many are struggling and you’re certainly not alone.
Other than Unemployment, a note on benefits
Not everyone qualifies for all the benefits that the more conservative-types seem to think are so easily accessible. Years ago, I’d been out of work almost seven months, and was temporarily living with a friend. I still had expenses of course — car payment and insurance, gas, mobile phone, student loan, a storage unit, and some other items — just not specifically rent and utilities. I applied for SNAP (Food Stamps) and qualified for exactly $7 of monthly benefits — because at the moment I wasn’t paying rent or utilities in my name. There are many expenses that don’t count while calculating benefits.
Unfortunately, often those in or near the middle class (earning, for example, between $30,000 — $70,000 annually), may have two problems: 1 — a much harder time qualifying for certain benefits; and 2 — they are far less likely to easily get help from friends and family — because it seems there’s an assumption that because you were in such an income range, you can take care of yourself — either with savings, withdrawing retirement money early, or whatever. It’s even worse if you’re over 30 — it’s just assumed that if you’re an ‘adult’, you shouldn’t need help, period. This is a very real perception, and it’s your first sign that in general, other people don’t care. Get used to that.
Let’s walk through what happens when you lose your job that was the sole source of your income. Most of these will apply whether or not it’s pandemic related — but hopefully won’t be so strict given the current situation.
Hating Your Mailbox
I’ll assume you already know about the panic and fear part. No one needs to be told to do this. This can very much still happen even if you have a savings cushion, or are lucky enough to receive severance pay. Quite simply, nothing guaranteed on the horizon = panic.
Soon, you’ll start to feel dread nearly every day you go to your mailbox. In fact, you may start picking up your mail once a week. Or less. Unless someone’s sending you a check of course.
But seriously, try not to avoid your mail — it won’t help matters.
You realize that you have a bunch of stuff coming out of your account automatically — maybe your mobile phone bill, your car insurance perhaps. Shit. You better address those.
As long as you can remember to pay them on time (assuming you even can pay), it’s probably wise to turn off your auto-deductions, and cancel or hold anything that’s not important right now. There’s nothing worse than having $20 left in your account, then finding out you overdrew because Netflix and Spotify came out. Trust me, even if it costs you a few more dollars monthly to turn these automatic payments off, it will be worth it as long as you don’t forget to pay.
You may be tempted to keep some unnecessary expenses — don’t be foolish by just crossing your fingers and hoping that you’ll find something soon enough that you’ll be OK. DO NOT DO THIS. In fact, you should try to cut any expense you reasonably can (without losing your sanity.) A $5 latte is $150/month.
If you’re like the average American, your car payment is probably around $400 — a big chunk of change when you have no income ahead. We already know a $400 expense is something many Americans would not easily be able to pay. (The 2019 avg new car payment in the US was actually $554 — but I’m trusting that you, dear reader, were a little more responsible than that, and would’ve scoffed at such a payment.)
You call the auto finance company and tell them that you’ve lost your job, and that you think you can pay this month, but then you’re not sure. Well, the rep on the other end of the line is likely immediately making a note in your record that you are potentially at risk for defaulting. Don’t be surprised in the near future that you get rerouted when you call in, and the debt collection people start answering instead. You’ll probably start hearing different pre-recorded disclosures as well. Fun stuff.
The rep tells you that as long as you have been in good standing, and made all of your payments on time, they will allow you to skip maybe one payment per year — but interest will accrue (of course) and the payment will move to the back of your loan. If you’re not in good standing, you already know how all this works.
OK you think, that’s better than nothing if I need it.
Next, you start calling utilities. Generally your electric, gas, and water are all going to press you for the date that you will be able to pay — and it usually has to be within 10 days. You feel like this is a joke; it’s not like you’re going to have more money in 10 days than you do right now. You decide to pay a small amount now, hoping for some level of understanding, and committing for the furthest date out they will allow, hoping to God you’ll be able to pay it then.
Discouraged, you call your mobile phone company. If you’ve been an exceptional customer for 10 years or so, always bought the newest phone, etc. they are likely to let you slide a month, and possibly just credit your bill for that month.
But, if you’re not the perfect customer, they’ll let you schedule payments — one or two typically, that need to cover the full bill and are likely going to be due within about 21–30 days if you’re lucky. You hesitate when picking a date, because you have no real reason to believe you’ll have the money by that date. They’ll ask you if you want to hear about any programs to help low-income people, but otherwise they’ll probably expect your payment within 10 days of the due date from now on.
A Note on Payment Promises
You’ll find out if you miss a payment that you “promised” with any of your expenses — you’ll get put on a real short leash, real quick. Keeping payment date promises is important for all of your bills. If you don’t keep to it, you’ll find out in the future when you move into a new place and try to get that utility service hooked up — they’ll want something like $200 from you as a deposit just to do business with them in the future. Seriously. This type of deposit is not legal in all states, but exists. A utility may instead ask you to pay a deposit now, and they’ll literally just add it to your bill. You might get it back — but they assume you’ll need their utility elsewhere again, so probably not, unless you’re moving out of state. It’s not their business, so tell them whatver you need to.
Wait — shouldn’t you be telling all your creditors, etc that you lost your job?
You start thinking to yourself, maybe it doesn’t make sense to call everyone and tell them I lost my job. But that’s what they tell you to do right?
As for announcing to everyone that losing your job is the reason you might not be able to pay your bill — my suggestion is the absolute opposite — don’t tell them anything they don’t need to know — either you’ll have the money by the time it’s due, or you won’t. So, don’t promise if you think it’s really unlikely you can pay. (Obviously, don’t lie and say you still have that income if asked.)
Since you’re new to this, you move on to calling your credit card companies. Thank God for minimum payments right?
You make it through the automated system to a human being, and unbeknownst to you, the same thing happens — you immediately get flagged as a potential default risk in the future. You’ll likely be dealing with collections soon enough if you’re not super-careful.
The credit card rep, somehow with a straight face, told you that the program for ‘people in your situation’ involves revising your payments to pay your card off in three years. Now, if you do the math on that, you’ll realize that it actually costs quite a bit more per month to do that — because your regular credit card payments are based on your total balance, divided by 60 months (five years) rather than three. Yeah. It’s kind of dumb.
Alright, so they’re not going to be much help. Guess you’ll have to just pay the minimum at least.
After the call, you start understanding why people sometimes laugh maniacally when things are so fucked up.
Try not to use your credit card as a lifeline during these times — not just to avoid extra debt — but they reserve the right, at any time, to reduce your credit limit, or to shut your card off. This can, and does, happen even if you’ve been making those minimum payments — because you told them you lost your source of income.
It’s not worth telling them — they generally don’t have anything that will really help you, so it’s just better they don’t know. Just try to find a way to pay, or tell them you can’t pay this month and they might give you 30 days.
Avoid telling creditors, utilities, etc. that you’ve lost your job until you absolutely have to. To them, it doesn’t matter if you lost your income, or are just having a temporary bank error — their process is very likely the same, so there won’t be any special pity for those who lost their jobs. You can always hop online to see if their website has information about how they handle it, or you can try Reddit perhaps.
They’ll Flag You
When one or two of these corporations flag you as a potential risk in their systems — it very much seems that this information is shared and circulated — because next thing you know, you’re getting more verbally demanding letters, a note on your water bill, sooner due dates, etc.
Some of them put you on a short leash immediately. In my case, my credit cards decided that the amount I owed would also be my new credit line — meaning my card was automatically “maxed out”. This happened to two of my active cards while I was still making payments. Them doing this prevents further usage and also damages your credit score. “100% utilization” as they call it, is really bad for your credit score — utilization is heavily weighted.
After one of my cards did this, another card followed days later, same thing. One by one, all of my credit cards stopped working as well. This of course happens when you need them the most (cue maniacal laughter).
You call the student loan people — and thank God for government-backed loans, because of everyone you call they are the only one with any realistic programs that could possibly help. If you‘re out of work you can typically get a deferment for six months.
But first, they are likely to give you a dizzying array of miscellaneous options, some of which include income-based repayment, which sounds good, but they do start your loan time over — and if you made good money before, you may find out that your regular monthly student loan payment could triple when you are working again. In my case, my $177 payment would have jumped to over $450 per month under this option when I regained employment. So learn about these programs before changing anything and be wary. Ask what your payment would be later. It may take several calls because you’ll want to stab your eyes out.
Under the pandemic emergency, I know at least some Federal student loans are on hold for six months automatically, until September I believe. It depends on your servicer — so please don’t assume you’re in the clear!
Finally you’ve got rent. Renting situations will vary greatly of course — if you’ve made friends with your landlord over several years, you may get a bit of a break. If you are living in a neighborhood run by a property company however, good luck.
Thankfully I haven’t had to personally deal with that in years, I’ve went out of my way to find real human beings to rent from, which has almost always worked out better. But I wouldn’t be surprised if you get the “Due in 10 days” or 30 days max. If you’re lucky, due to the pandemic they may temporarily waive some late fees after the fifth of the month. Let’s hope so.
In a scenario where you have savings, but you dislike your current landlord and want to move — keep in mind two things 1) an eviction is going to make it very difficult to get a lease anywhere, and 2) If you try to get a new lease with no current income, they probably won’t care that you have savings (unless you pay the whole term of the lease up-front with it). They’ll either want proof of income, or a co-signer tenant. It might suck, but you may need to stick around your current place… for now.
Note: I didn’t write about mortgages because I’m a Gen X’er that hasn’t been able to buy a home yet — sorry.
Let’s face it, if you lost your job, you lost your insurance by the end of that month, unless you can pay what is likely a much higher premium through COBRA (because your former employer will no longer contribute to the already outrageous cost). Your ‘part’ of the health insurance premium could easily double because of this. Your health is probably more important than your credit score alone, but you may need to make some tough choices in times like this.
God help you. DO NOT expect courts to be reasonable. They won’t just “understand” — especially if you do nothing. Seriously. Instead, you can file a “Life Event” or “Change of Circumstance” document with the court (whatever your local court calls it). Note: If you and your ex can’t agree on a temporary reduced amount — a judge is going to decide that for you. You probably don’t want that — I can guarantee the amount won’t be $0 unless you don’t involve the judge/magistrate.
Either way you may need an attorney to handle the situation — if so, I recommend call some, just stating plainly what you need (temporary reduction/whatever) and asking for a FLAT RATE. If you’re lucky, you can get this done for under $500 (I wish I was joking). I am not an attorney and this is not legal advice — all circumstances are different.
Good news! A friend sent you a check for a few hundred bucks to help you get by this month. That’s a good thing — because you need that money tomorrow to actually pay some bills on time and buy some food. But you wake up the next morning and discover that your account is not credited yet. WTF? In the past they’ve credited your account almost immediately, or the next day at most — but not now.
Welcome to the shit show, where your bank will now hold funds for seemingly no reason for up to a couple days. Why?
Again — this is why you don’t tell anyone who doesn’t need to know that you’ve lost your income.
Oh, and don’t assume the same thing can’t happen with PayPal, Venmo or others. Call it an anecdote, but this has only ever happened to me when I was struggling financially with no regular bank/paycheck deposits. Even if it was supposed to be an “instant” transaction. It’s happened to me more than once, and can happen to you.
Try to use whatever money transfer app is most certain in a pinch. Consider using Zelle, which should be built into your bank software already, and has a nearly-instant setup, as long as it’s through your bank — if you use the separate Zelle website/app, the account will need verification and you won’t get anything for 2–3 days. Zelle is free and instant, has always worked for me, and all major US banks have it included already — so your friends already have it in their existing banking app.
Credit Reports and Credit/FICO Score
Ah, fuck. You didn’t even think about that. The very first thing you need to know before you start filling out a bunch of online forms is this:
Your credit report does NOT usually contain your credit score.
Seems crazy, but the actual credit report doesn’t usually include the figure you’re looking for (though they may offer it at a price). Your report pretty much just shows all of your accounts past/present and the standings, and any specific delinquencies or collections accounts.
There are three credit agencies: Equifax, Experian, and TransUnion. They don’t all necessarily have identical information, thus your score may differ with each. You need to know this — because if you apply for credit, a loan, etc., and they happen to pull only from Equifax, and your Equifax report has bad info screwing up your score, you could very well get denied credit. And, you can’t just tell the place “Make sure you pull TransUnion” — they probably just use a service and don’t get to pick.
FYI, there’s only one official site to get your three free credit reports per year. If you don’t use the one below, you’ll get a bunch of spam and junk:
During these times of COVID-19, accessing your credit is important. That's why Equifax, Experian, and TransUnion are…
Due to the pandemic, I understand that all three credit agencies are offering free weekly online reports until April 2021. For a print version, or in non-pandemic circumstances, use the site above (annualcreditreport.com).
No matter how depressing, you should absolutely keep an eye on your credit score using free or inexpensive services offered by Credit Karma (TransUnion and Equifax covered) and also Discover, which covers Experian (free to non-cardholders!)
You need to keep tabs on your score. Many don’t realize that potential employers often check your credit score when considering hiring you. They may not have a hard-and-fast rule about it, but it would really suck to miss an opportunity when you badly need a job — because of the bad things that already happened you couldn’t even control.
To make things more annoying, there are multiple variations of your FICO score that are pulled/referenced by creditors. You don’t get to see these. Due to different risks in different industries, a department store credit “score” likely won’t be the same as the one the car dealership pulls, or the one your insurance company checks. That’s why it’s easier to get a department store card — it doesn’t mean you have great credit. And yes, insurance companies (like auto insurance) often check these scores too — they’re all about risk, remember?
At least during the great depression, people saw themselves in this together and they helped one another.
You’ll find out which of your friends are “bootstrappers” (as I like to call them), and that some of them may not be your friends when this is all over. Possibly by your own choice.
If your situation persists for several months, be mentally prepared to be treated like shit by your friends and acquaintances — even if you haven’t asked a single one of them for help or money. This just seems to happen over time. That right there is a big one — but for some reading this article, they know this is a real thing.
Borrowing money may be necessary, but it can really screw up a friendship. My advice — if this comes up, be absolutely sure that the word “loan” is used if the expectation is for repayment, rather than just a gift/help. Often people giving/lending do not like to use the word — but, the people receiving will assume it does NOT need to be paid back UNLESS the word “loan” or “lend” is used. Always clarify — you can destroy a friendship over $20. Seriously.
If you are currently working and all seems fine — take stock; do an honest self-assessment:
Look at what you earn and your monthly expenses. Look at your savings and any other liquid assets, if you have any. You might as well assume that you won’t be able to touch any retirement funds without losing nearly a third of it in taxes and penalties.
If it took you one full month for every 10 grand you earned to find a new job, how long would you actually make it before bills couldn’t be paid? Are you willing to use all of your savings, or lose a chunk of your retirement? Do you have family that is doing well enough, and would be willing enough to help you if need be?
No matter how stable where you are financially, just know, there is very little mercy in the American system; benefits are often not easy to qualify for, and are typically extremely inadequate for how much the basic costs of living in America are today. Our society is at a critical point — either the economy needs some real, healthy growth, the institutions step in to help, or the message is quite clear that we will be on our own. So far the institutions have failed massively.
Welcome to the poor house. We know you won’t enjoy your stay — hopefully you’ll be able to get the hell out of here soon. Best of luck.
Stay tuned, and stay safe.