What To Do When You Are Drowning In Credit Card Debt Due To Unemployment

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Have you become recently unemployed due to the pandemic?

If so, this could be particularly painful if you are also deep in credit card, student loan debt, or other types of debt.

What used to be a rare occurrence in our society is now, all of a sudden, extremely common, leaving millions of Americans feeling trapped, lost, overwhelmed, and even ashamed of their circumstances.

The fact is You Are Not Alone.  The economic collapse of 2020 has made sure that this particular boat is currently quite full.

But, however bad things may be now, it is still your responsibility to take action to begin to reverse your situation.  But what are the most valuable steps should we take right now, starting today?

What if you could consult a wealth coach with years of experience helping people just like you work through these matters for free?

That would be a good start to help you out, right?

Well, what if you could get the best ideas from FIVE of them right now?

Use The Top Money Tips From 5 Financial Coaches To Stop Drowning In Credit Card Debt and Build Wealth!

If you are looking for ways to significantly reduce your debt even if your circumstances are currently looking pretty grim, then you have definitely come to the right place!

I surveyed a group of financial coaches who are busy helping regular Americans successfully work through this current, unprecedented fiscal chaos about how to successfully get out of debt.

Not only that, but they have also generously provided an additional piece of advice about how you can also start building a base of wealth to be able to successfully weather any future economic storms.

The valuable answers they provide below will surely get you started on the right path…and keep you there.

Review the guidance below and be sure to keep this information handy so that you can refer to it as often as you like while you begin your journey of getting your life back on solid financial footing!

Our First Financial Coach Ben Watson Discusses What To Do When You Are Drowning in Credit Card Debt

Per Ben, here’s what to do if you are having trouble right now managing your debt:

If your primary source of income has disappeared, your first priority should be to replace at least a portion of that lost income. Working odd-jobs, part-time or finding a gig employment can help you keep afloat until your original job becomes available again or you find another full-time employment. Cut all spending except for those absolutely necessary to provide yourself and your family with food and shelter.

The next thing you should do is call your credit card company and explain the situation. Many card companies will waive penalties and interest due to catastrophic circumstances or lower minimum payments. Missing payments will likely lower your credit score but that shouldn’t be your main concern if you have no income.

So what does Ben say when asked “How Do You Build Wealth”?

Wealth can mean vastly different things to different people, but it is entirely possible to earn income from small amounts of investment. With enough time, even small amounts of money can grow to large sums.

I’m not saying go out and bet on the long-shots, but by utilizing smart investments and scalable business models, a small starting amount of money can provide great returns. In my personal experience, I grew a business from $100 to open a checking account, to replace my full-time salary as a CPA in just over 12 months.

This took time and a lot of effort, but by growing “at the speed of cash” and avoiding debt entirely, I was able to provide myself with a runway that was entirely dependent on how much time and energy I wanted to invest in in. The old adage of “you gotta spend money to make money” isn’t necessarily true if you can build a business organically with low overhead.

I’ve coached clients who have comfortable lives from things like blogging, web design, and dog-walking because they were willing to invest more than the typical 9-5 workday just hoping they get that raise at the end of the year.

Ben Watson, CPA
Ben Watson, CPA

Ben Watson, CPA is the virtual CFO of DollarSprout.com and founder of Fiscal Fluency, a personal finance and business coaching company.

He equips small businesses and entrepreneurs with the skills and accountability to manage their businesses with confidence rather than fear.

He’s also the co-creator of the Business Launch Kit - an online course with simple to follow steps to create your own business without making a mess.

Ben’s advice regarding investing time when you have more of that than money is excellent.  Now, let’s hear from our next financial coach.

Penny Kidd Tells Us What to Do When Drowning in Credit Card Debt

So Penny, if you had a client that had a mountain of credit card debt and recently lost their job what advice would you give them? 
Per Penny:

We recommend prioritizing the things that keep you safe first, such as utilities, food on the table, rent or mortgage, gas in the car to get to work or job interviews. I would only pay the minimums on credit if you can do that and save as much as possible right now.

Trim all fat from your life including subscriptions, eating out, entertainment until you can work again and get some breathing room.

Don’t worry as much about credit scores and debt reduction, it’s time to be in crisis mode. Later you can then craft a plan to eliminate debt and rebuild. No one wants to plan for bankruptcy, but if you’re in crisis and get behind on payments, make sure you are protecting things you cannot bankrupt later and not lose housing.

Utilities come first because eviction or losing a home takes much longer.

Create a plan immediately and don’t hide from it because you are stressed. There are lots of free resources out there for now.

Then when you get a little breathing room, look at your behavior and circumstances to plan for the long haul and the things that come to all of us, even when there is no pandemic. When you have an emergency fund and no debt, this kind of blow is easier to handle.

So Penny, is it possible to build a lot of wealth starting from zero?

YES! I believe in a small emergency fund, attacking the high-interest debt so you’re not wasting money giving it to banks and creditors and consistent investing every month with what you would have paid to debt and more!

It’s mind-blowing how much money can accumulate with compound interest over time.

There are tools online to show you what every dollar you blow could have added up to when it’s invested, even conservatively.

Don’t fall into the trap of thinking you cannot build wealth, because you have options to increase your income and make choices about where you spend your money.

Don’t rely on the government or anyone else for your retirement!

Penny Kidd, Financial Coach
Penny Kidd

Coaching is relationship based. Most of all, personal finance is PERSONAL. It is a process of establishing financial goals and learning skills to achieve the goals YOU set and develop good habits that last.

Through private and confidential sessions, I provide encouragement and accountability over time to help my clients become more intentional with their money and feel more confident in their financial future. 

You can reach me on FacebookLinkedIn, Instagram, or Twitter. or just call 970-215-7618.

Thank you so much Penny for your guidance! Let’s meet our next financial expert and see what she has to say.

Next Up, Lisa Duke Has Great Advice To Take If You Want To Get Out Of Serious Credit Card Debt

This is what she had to say:

If you are burdened with consumer debt and recently became unemployed due to the pandemic, you have a few options.

If you have an emergency fund or other source of income, such as a side hustle or a working spouse, put aggressive repayment plans on hold and pay just the minimums until your income gets back on track. Go ahead and get out of any bills you can by canceling any extras, such as memberships and subscriptions.

If you have multiple vehicles, you may want to try living as a one car family for awhile. My husband and I were able to do this for a few years in metro Atlanta, so it may be possible if you get creative.

If you aren’t able to make the minimum payments, the best thing you can do is to contact your creditors and let them know what happened. Many of them currently have programs in place for people in exactly this situation. You may be able to skip a payment or negotiate lower payments for awhile. I would recommend doing this for all the money you owe to give yourself some breathing room.

There’s always “the nuclear option”, which would be to declare bankruptcy. That would likely wipe out almost all your unsecured debt, such as credit cards. However, doing so will hurt your credit for the next several years, so this should be a last resort.

The main thing is to try to stay focused on your options. Scarcity thinking plus emotions like guilt and shame can narrow your view of the situation so that you don’t see possible solutions. A friend or coach may be able to help.

And here are Lisa’s thoughts on whether it is possible to build a financial portfolio of wealth starting with little money:

Yes. In some ways, it may be easier to build wealth if you start with little money, as you are already familiar with how to live on little money.

Step one is to live on less than you make. You can do this by trimming expenses. Question what many Americans consider to be necessary, such as a newer car for each adult in the family and a large home.

If you are truly already at the bare minimum, your focus should be to keep your expenses low while growing your income. Side hustles can be a way to make more money and learn business skills. Education may provide a way to get a better job. And don’t overlook non-degree programs like certifications. Often these are more affordable and more in demand than a generic degree. Check out what the market needs before selecting the program you invest in.

Once you begin to grow the margin between expenses and earnings, direct that margin first to elimination of high interest rate debt and then to an emergency fund (so you don’t have to raid your investments if something goes wrong). Then start investing. The easiest way is through your workplace plan. If you don’t understand it, ask HR, a co-worker, or Google for how to get started.

Remember time in the market beats timing the market. Start as early as you can and put in as much as you can and let compound interest do the heavy lifting.

Lisa Duke

Interested in learning more about money or in sharing what you've learned? Join the Money Club with me, Lisa Duke!

I am here to help you pay off debt, save for emergencies, and get ready to invest.

If you have struggled with this in the past, you may have limiting beliefs. Work with me one on one to learn how to delete your old programs and install new ones so that the changes you need to make flow with ease and can be maintained. You can reach me on Twitter: @lisaduke or Instagram: lisadukests

Thank you Lisa for your thoughts!

Our Next Financial Coach, Katie Oelker Discusses The Best Way To Start Getting Rid Of Debt

According to Katie:

If you’ve gotten yourself into too much credit card debt and then became unemployed due to the pandemic, I would contact your credit card companies ASAP to determine what they can do for you. A lot of companies are waiving interest and suspending payments and may be able to help you out if you explain your situation.

If you’re unable to pay the minimums on the account and your company won’t let you suspend payments, I would find a part time job such as driving delivery or another industry that’s hiring during this time to help make payments until your regular employment starts back up.

In addition, I would hold off on adding any additional purchases to your credit cards, unless you need them for bare necessities such as groceries.

Thanks Katie! What’s your take on building wealth when you have almost no money?

You can absolutely build wealth on little money, but it does take more discipline. If you’re able to pay your bills then it becomes a matter of weighing want vs. need.

A lot of purchases are made thinking we “need” them, when in reality we are just buying them out of want. Instead of spending money you don’t need to spend, you could use that money to start and fund an emergency account, invest in a Roth IRA or put money into an employee sponsored retirement plan, such as a 401k.

When invested, your money will grow quickly thanks to compound interest. Building wealth then becomes less about how much you invest and more about how early and regularly you invest.

Katie Oelker
I help individuals get a grip on their money so they can pay down debt and start saving faster than they thought possible.  The best way to reach me is to send a message to info@katieoelker.com

Many thanks to Katie for her inspiring advice.

Our Anchor Coach Veronica Gomez Mojica

Veronica, what advice would you give me if I am heavily in credit card debt and lost my job due to the pandemic?

First things first, make sure you are following a budget. Oftentimes you are losing money in places you are unaware of because you are not tracking where it is going effectively. There are many forms and apps online, such as EveryDollar and You Need a Budget.

Find a budget that works for you, update it often (at least monthly) and find someone to discuss it with that will hold you accountable.  Include all your debt payments in the budget, as well as savings. Make minimum payments until you have saved up $1000 for emergencies.

Hopefully having an emergency fund will help you to avoid taking on new debt.

Reach out to debt collectors if you feel that you will not be able to make payments. Explain to them that you will pay what you can and are actively seeking jobs. Stay in constant contact with them for as long as you need to until you are able to pay the full payment.

While staying at home, I have worked as a financial coach, a teacher for VIPKid and have transcribed with Rev.com just to name a few ways you could think about making money yourself.

Continue using a budget for your money even once you are back to your normal salary. Don’t lose hope!

Great! What wealth building advice would you give me in this situation?

My husband and I have used EveryDollar as our budgeting tool since we got married. We have paid off $50,000 worth of debt, built up a 3-6 month emergency fund and are now contributing to a retirement account. We have also opened 529 accounts for our children (which is a way to make investments in their education using today’s dollars).

We have gone from two salaries to one, and when we return to two salaries in a few years, our goal is to continue to live off of one salary and build up our retirement and 529 accounts as much as possible.

Budgeting and living below our means has allowed us to continue to build wealth on one salary, when we were previously in debt with two salaries.

Veronica Gomez Mojica - Dave Ramsey Certified Financial Coach
Veronica Gomez Mojica

Financial Coach Veronica is here to help you get on a budget, get out of debt and build wealth.

I offer online, in person and over the phone confidential coaching sessions. I look forward to helping you meet your financial goals!

Feel free to reach out to me at 210-835-6929 or by email at financialcoachveronica@gmail.com.  Or see my FB or IG:

Many thanks to Veronica for sharing her story and to all the guest financial coaches for sharing their wisdom and guidance that should be a huge help to anyone struggling to stay meet their credit card or other debt obligations and want to also build a more comfortable future!