This post is in collaboration with BetterHelp.
A few weeks ago, The Plutus Awards asked this question on Twitter:
What do you do when difficulties enter your life and you can no longer bring in any income?
It’s a tough one to answer, partially because there really aren’t any great answers.
I mean, the best answer is to have a huge emergency fund before disaster strikes. But you never know when disaster will strike, causing you to lose your ability to bring in an income.
And perpetually maintaining an emergency fund that would cover 12 months+ of expenses is often, though not always, a mathematically unobtainable goal for average Americans.
Table of Contents
What to do when you have no income and no savings.
I thought about the times in my life when traditional income wasn’t obtainable, or my ability to work was diminished so dramatically that my income was insufficient to my needs. More than once, an emergency fund saved me.
But also more than once, I’ve been caught with empty pockets.
Today, I’ll go through the things that I do when I’ve been caught with empty pockets. Because once disaster strikes, it’s too late to build that emergency fund.
And when you’re sitting nine months into a pandemic where money has been scarce or dangerous to obtain, you can’t build savings with income you don’t have.
Here are the basic six steps I identified in my past successful behavior in the midst of a financial disaster.
Or at least attempt to.
Because here’s the thing about disasters: More often than not, they’re brought on by something outside of your control.
As Americans, we live in a culture where unadulterated individualism is a badge of honor. If anything is outside of our control, it can threaten our very sense of identity and self-worth. So instead of recognizing those things outside of our control, we internalize blame.
I should have saved more.
This must have been caused by my own irresponsibility. I could have done things differently in retrospect, so that must mean I am the one responsible for this period of my own suffering.
If I can’t bring in an income, what good am I to anybody?
These are not helpful thoughts. Some of them are blatantly inaccurate and stem from extremely problematic norms we’ve inherited from our culture.
We often blame ourselves so we don’t have to acknowledge our own lack of control in the grand scheme of things. We feel safer berating ourselves than recognizing that in life, there will be periods of time where we cannot get by without outside help.
That help may be emotional, spiritual, physical, or — yes — even monetary.
If we blame ourselves too much, we can actually pull away when help is offered and available. We’ve convinced ourselves we’re somehow undeserving.
With a little work, we can change those thoughts into more positive, helpful ones. This work is especially effective when go through it with a therapist.
I have never completed any of the following steps without first forgiving myself at some level.
I haven’t done it without recognizing that I’ve done the best I can with the resources I had at the time, and that there are, in fact, things in my financial life outside of my control as an individual. Whether I like it or not.
After I’ve worked on forgiving myself, I start to make a plan on how to get by and hopefully make things better over the long-term.
The first step on that journey is assessing resources. There are three resources I target:
- Resources can definitely be money. You might not have a 12-month emergency fund, but every penny you have socked away into savings can make a difference when your bank balance is low.
- I also like to look at resources that aren’t money, but could be turned into cash with minimal effort. One way to do this is selling items around your home that don’t carry sentimental value.
- Another huge resource is time. Sometimes, when you’re not able to bring in an income, the same thing limiting your income may be limiting your time. If you’re lucky and it’s not restricting your time, you might find that while you can’t secure a full-time income right now, you can find ways to make money on the side to help make ends meet.
Assess government assistance.
Do not let the judgement of others deter you from accessing the resources that can help you get by. If this second stimulus package ever gets signed, programs you can look to may include but are not limited to:
- Expanded unemployment benefits.
- Potentially food stamps (SNAP benefits) even if you’re on unemployment.
- A second round of PPP.
- Potential rent assistance depending on your state and/or locality.
Look for grants.
In times of distress, I also look to grants. For example, when Coronavirus hit, I was awarded a grant from PEN America. It helped me smooth over bumps as I got used to this new ‘normal’ and attempted to find new ways to function in my career.
Honestly, I haven’t seen as many grants available as the pandemic wears on. If you can find them, apply, though don’t expect the search to be easy. Also bear in mind that if a grant is easy to find, you may have a lot more competition than a grant you have to dig for.
There are grants for other life disasters outside of the pandemic.
For example, grants for recovery from domestic violence are out there, though they often come with a requirement that you’ve been living apart from your abuser for a certain period of time.
While in an ideal world, Medicaid and/or Medicare would cover all necessary equipment related to a disability in all fifty states, that’s not the reality we live in. There are nonprofits out there that attempt to fill the gaps by issuing grants for financial emergencies related to disability or medical need.
Whatever is impacting your ability to bring in an income, search for grants related to that topic. You can also look for grants tailored to specific expenses and qualify based on your income level.
Make a plan to get by.
Now I know all the resources available to me, whether they’re resources I own, resources from the government, or grants from outside organizations.
I have all the information I need to make a plan.
The first thing I do is prioritize my expenses. The things I can’t live without, like food and shelter. Any resources I have that can cover these things for the next twelve months, like my own cash, rental assistance or SNAP benefits, are applied first. Without food and shelter, everything else gets harder, so these expenses must be covered first.
Then I’ll eliminate any frivolous expenses, like paid subscriptions to services I’m not actually using or don’t actually need. During the pandemic, it’s probably been financially easy to cut out expenses for things like nights out with friends or activities for the children. Even though it’s been emotionally difficult, it’s an emotionally-difficult decision a lot of us would have made anyways due to the lethal nature of this easy-to-spread virus.
This sometimes-necessary form of disaster budgeting doesn’t leave you feeling super great or empowered at the end.
At least it doesn’t for me.
It usually shows that things are going to be financially difficult to impossible in the near future.
Which is why I go on to complete one final step.
Make a plan to come out stronger on the other side.
I can do hard things for set periods of time.
But it’s harder to do those hard things if I don’t feel like there’s an end goal. A light at the end of the tunnel. A way out.
So after I make my disaster budget, I also make a plan to come out stronger on the other side.
Here are some examples of plans you might make to do just that.
Go back to school.
At one period in my life, I had a choice: I could keep working at my less-than-$10/hr job and continue scraping by forever in the name of pride and individual responsibility, or I could access government benefits and go back to school. Because of other circumstances in my life at the time, I could not do both.
The latter would require both humility and a shift in how I viewed myself in the world. But it would lead to a higher income and more stability for my family long-term.
Reassess your business goals.
During this period where you’ve lost income, you might have to move differently in your business.
Did you lose a W-2 job that you don’t see coming back any time soon? You might consider building a freelancing business.
If you have a business, you might start focusing the limited time you have to work on behind-the-scenes efforts. This can prepare you for a successful relaunch when the disaster is over. It’s a shift from the day-to-day grind that used to provide an income, but sets you up for future success.
Get a clean slate.
If your money situation is in enough peril and you’re carrying debt, erasing or restructuring your debt may help you get to a financially-stable place at a quicker pace. Pursuing bankruptcy is a nuanced decision that isn’t right for everyone.
Some of your money — such as savings and investments held in certain retirement accounts — is protected from bankruptcy proceedings.
But there are definitely negative effects like a diminishing hit to your credit report over the next seven years and repossession of bank-owned assets. If you’re going to be behind on payments for the next seven years, anyways, it might be an option you want to research further. Just be sure to be thorough so you understand all the consequences.
Will this work?
Honestly, even the best-laid plans rarely turn out exactly the way I expect them to when a disaster hits. But by pursuing them, I’ve been able to open up future opportunities I didn’t even see coming.
Having a long-term plan to level up — even when I can’t immediately achieve — keeps me moving forward. Even when everything going on around me makes me feel frozen in place.