Matters of Money

How to prepare for the August ‘income cliff’

Given that there’s no guarantee the tens of millions of out-of-work Americans will receive an additional stimulus check or beefed-up unemployment benefits past July, it’s best to start preparing now for a drastic reduction in income. Here are a few steps experts recommend:

1. Get your budget in order

If you still aren’t using a budget to track your spending, it’s never been more important to create one and stick to it. “You should have a plan,” says LaBrecque. “Set your budget to what you will make when the [extra] $600 goes away,” he says, and “live on that.”

LaBrecque says you should give yourself some time to adjust to your new income restraints before having to deal with the “sticker shock” of August 1, assuming no additional stimulus measures are passed by Congress. Any savings you can pull together from the difference are likely to come in handy later.

See where you could spend less, especially for nonessential services. Odds are that you’ve already pared down your expenses during unemployment, but it doesn’t hurt to take another look to see if there are other places you can cut.

2. Prioritize your bills

If you do find yourself in a financial crunch come August, you should dip into your savings to do what you can to keep up with your bills. Try to avoid withdrawing from your long-term savings and investments — your retirement accounts, for example.

But if you find that you’re financially exhausted, you may be in a position in which you need to pick and choose which bills get paid.That means prioritizing, and your high-priority bills should be those that keep a roof over your head and food on your table.

For the bills you can’t pay, be sure to reach out and let the creditor know — whether it’s your credit card company, your utility provider, or your student loan servicer. Many companies are remaining flexible with payment options, and are willing to work with you if you let them know you need help.

Many businesses and lenders are willing to work with you if you simply ask,” says Natalie Colley, a certified financial planner and advisor at Francis Financial in New York. “The intent,” says Colley, “is to reduce the strain on your cash reserves in order to stretch them for as long as possible, in the event that you are unemployed for longer than expected.”

3. Look for new opportunities to earn money

If possible, see if there are any opportunities to make some money. There are numerous side hustles out there that can be done from home, for example, and you may be able to do some gig work — delivering food, etc. — to help pad your bank account. It may not replace your full-time income, but if you’re truly in dire straits, every little bit helps. And remember: Just because you’re picking up some work doesn’t mean you’ll necessarily give up your eligibility for unemployment benefits.

Although the job market is rough, don’t give up on full-time work, either.

There are several companies hiring right now,” says Nadine Marie Burns, a Michigan-based certified financial planner at A New Path Financial. Burns says it’s best to start now, because finding a new job can be more time consuming than many people anticipate.

The hiring process takes several weeks and there are openings in most areas of the country now that many have opened even partially,” she says.

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