Lost Your Job? How to Survive Without Stiffing Your Landlord!

Disclaimer: This blog post is for informational purposes only and does not constitute financial planning, accounting, or legal advice. This information is provided with the understanding that it is general in nature and is not professional advice. Before applying this information to your particular situation, contact a financial, tax, or legal adviser.

There was a post on the forums asking for a personal loan to cover a hardship: her husband lost his job and things are really tight. I suppose she figured investors have money and would be willing to “invest” in her. As a financial planner, I’ve seen this situation many times and my recommendations are NOT to stiff the landlord! You need a place to live, and getting evicted will only make things worse down the line. Rather, I generally recommend the following action plan:

1. I recommend everyone in a job loss situation determine their "4-Walls" costs: Basic shelter (rent), basic transportation (minimum you can get by with), basic food (the minimum you need), and basic clothing (again, the minimum you need) and then make sure your day-labor jobs cover those costs. If not, then it’s time to cut costs (moving to a cheaper place, selling car and driving a hoopty), take on extra jobs (pizza, babysitting, etc) sell stuff (it’s JUST stuff), and do whatever you can to make sure your outgo is the same as your income!
2. I find most people can cover their 4 walls costs but if they can't cover things like cable, phone, car loans, etc then the general strategy (again, I can't say whether this is applicable to your situation without getting your numbers and I wouldn't do that in this forum) is to start off by selling EVERYTHING (like the stuff in storage you’re about to lose), cutting off or suspending the "extra utilities" (like cell phones, cable, internet), and serious “beans and rice” living. Suspending an account is like temporarily closing it but without the steep termination penalty most places charge. Many companies will give 6 months. or longer for hardship. Even cutting expenses like contributing to retirement plans or kid’s college. Babygirl won’t die if she can’t do cheerleading and kids can always work through or find scholarships for college.

3. When someone can’t make ends meet on with these two recommendations I then ask them to consider reaching out to charitable organizations (maybe they don’t pay rent, but they can cover something else like groceries so that you can pay your rent or provide childcare so you can take on another job).I routinely volunteer for organizations that provide assistance but require each recipient to sit down with a financial planner first, and they aren’t allowed to get more assistance unless they show they are following the plan we put together. Another thing to do is consider bartering for the things you need but can’t afford and applying for work with flexible hours from home (such as hotels, like Hilton, hiring reservation takers).

4. I suggest people reach forward toward their creditors. Most of us run from them! We don’t answer unknown numbers, we try to avoid coming into contact with our landlord, and we stay away from Thanksgiving because Aunt Ethyl is going to ask for her money back. Reach TOWARD your creditors! Contact your landlord EARLY. Assure him/her that you had this life event and that you are going to do everything in your power to pay rent on time. Call your credit card companies. Explain you don’t have money but will pay as soon as you can. Contact your cable, cell phone, etc and see if they have some creative solutions for you!

5. Finally, when all else fails, consider writing (and sending) a monthly pro-rata letter. You can find a lot of detail on how to do this on the internet and can find free places like some libraries and some hotels that will let you type these up and print them out. The pro-rata letter basically says “I am broke, here’s why (story). I’m taking action (here’s my budget and plan). I can’t pay you right now but I will pay you one day. Here’s your pro-rata share of what I owe you and I promise I’ll get you the rest when we can. Would you consider lowering interest rate/fees/amount owed/etc. Note: I usually warn my clients to look at this from the creditor’s point of view. If you owe me money, and you send me a pro-rata letter with a budget showing that you’re paying for cable, vacations, salon appointments, etc, then I am not going to “accept” your reasons for not paying me. But if I see you really ARE doing the best you can with your temporary situation, and you are making an effort to get out of that situation, then I might be willing to work with you- give you a few months no interest, remove fees, etc.

In my practice, I’ve seen people overcome what looked like IMPOSSIBLE situations following these simple (but not easy) steps.

Blessings,

JJ

PS: If you are contemplating bankruptcy, please consider FIRST trying the steps outlined above. Many times people end right back up in bankruptcy court because they never corrected the problems that led to bankruptcy the first time. If you follow the steps above and still have to file for bankruptcy, at least you’ll be better poised to make it a success!