How to Deal with an Unexpected Loss of Income

Factoring in future decreases in income is a normal part of financial planning. For example, you expect household income to drop when you retire. Unforeseen loss of income due to illness, job loss or the death of a family wage-earner are another matter. 

If you are faced with such a crisis, the key to managing the situation is to remain calm and take aggressive steps to preserve your financial health.

Take Inventory

The first step in coping with an unexpected loss of income is to determine what you have to work with. Draw up a list of your remaining income and all of your monthly expenses. 

Write down everything you spend, including food, bills and contributions to savings plans. Make another list that details all of your assets and liabilities.

Cut, Cut, Cut

Be ruthless when you cut expenses. Cost-cutting is a temporary measure, and you will be able to add things back in to your budget after your financial stability is secure. Trim spending on entertainment, groceries, clothing and other consumer goods. 



If you are facing a long period of reduced income, consider downsizing to a smaller car or home. If you are in danger of falling behind on bills, contact your creditors. Many will reduce monthly payments, and they may be willing to temporarily suspend payments.

Boost Income

Find ways to add extra income. For example, you might have a skill you can market part-time through an on-demand job service like Tackl. Local educational institutions hire proctors to supervise standardized tests on weekends. 

If you must stay home to care for children, look for telecommuting jobs. The key to finding extra income streams is to get creative, and don’t be afraid to try something new.

Child Care Issues

The cost of child care can be ruinous if it is added to a sudden loss of income. An employer may be willing to help. Today, many employers offer child care assistance as a job benefit. Keep track of money spent on child care. 

If the cost is related to work or attending school, it may be tax deductible. Investigate joining a child care or babysitting co-op in which parents share child care duties.

Deal with Legal Issues

Sometimes the cause of a loss of income raises legal issues. Most commonly, this occurs when someone’s actions cause an accident, injury or death to a family wage-earner. If you are faced with this situation, you have legal options. 

The party that caused the problem can be held liable for loss of income. Don’t hesitate to contact a wrongful death or personal injury attorney from a firm like Wells and McElwee if you think you may be entitled to damages.

Conclusion

Sudden loss of income is potentially devastating, especially when it is accompanied by illness, death or job loss. The secret to financial survival is to be resilient. Take charge of your financial affairs, and do not be shy about making whatever changes in your lifestyle are required