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In 2014, Michael Lacy and his wife set the ambitious goal of paying off $21,000 in credit card debt and auto loans. Eight months into the journey, Lacy was laid off, an experience that many Americans are facing amid the ongoing coronavirus pandemic.
To make things harder, Lacy's wife has a chronic autoimmune condition, which flared up — a common symptom of stress — and she had to take two weeks of unpaid leave from her job.
But the Lacys kept their cool and adjusted their plans. They still managed to pay off their debt in 16 months, just four months longer than their original goal.
Below, Lacy shares his three tips for keeping calm during a layoff, even when paying off debt.
Before Lacy's layoff, the couple had given considerable thought to what they wanted out of life. They bonded over a shared love of travel and the desire to have more time to spend at home raising their future kids. After having these important discussions, Lacy recalls that getting laid off did not shake him as much as one might expect.
"We had already had the important conversations with each other about what we wanted our life to look like. I was determined not to fail," he tells Select.
With a clear vision in mind, Lacy picked up a gig delivering food while he sent out resumes and prepared for interviews. Knowing that his hard work was inching him closer to the future he and his wife envisioned carried him through the ups and downs.
Lacy and his wife were motivated by the future, but they knew they couldn't get there without starting exactly where they were.
There's a lot of anxiety and pressure that comes with losing your job, says Lacy, especially when you're in debt. But you must recognize this panic without putting pressure on yourself to act on it, he advises.
If it's stress, take a minute to relax if possible.
"Sometimes, it's OK to not be OK," explains Lacy. "Even now during this pandemic. Everyone is saying this is a great time to start a business. But often times, when we do things out of panic, we get ourselves into worse situations."
After you've identified what your most important goals are and given yourself a moment to collect your thoughts, it's time to figure out how much money you spend versus how much you expect to bring in.
"Before you do anything, lay out your expenses next to any income you're anticipating, whether its unemployment, your stimulus check, alimony, child support, etc.," says Lacy.
Then take a minute to calculate the difference between your expenses and income. Even if you're not bringing in what you need to live on, this way you know exactly how much shortfall you're facing.
"Even if you have a $500 deficit, you can reach out for help," says Lacy. "Lenders are being gracious right now."
Lacy recommends calling your lenders and asking if they can reduce your payments or your interest rates. Highlight your good history as customer, he advises, whether by reviewing how many on-time bills you've paid or reminding them of how many years you've been a loyal account holder.
Once you remind them how valuable you are to their company, "ask 'what can you do to help me this time?'" advises Lacy. Even if it doesn't solve everything, "you might see that $500 deficit go down to $100, which is a lot more manageable."
If you find you need a little bit of wiggle room to pay off lingering debt or cover your essentials while you hunt for a new job, you might consider a credit card with an introductory 0% APR for balance transfers and purchases. Most require good to excellent credit scores, but if you qualify you could pay off expenses with 0% APR over time.
The Citi Simplicity® Card, for example, offers a long 0% intro APR period for 21 months on balance transfers from date of first transfer and 0% intro APR for 12 months on purchases from date of account opening (after, 19.24% - 29.99% variable APR; balance transfers must be completed within four months of account opening). There is an introductory balance transfer fee of 3% or $5, whichever is greater for transfers completed within the first 4 months of account opening. After that, your fee will be 5% of each transfer (minimum $5).
And if you are looking for no interest and a rewards program, the Citi Double Cash® Card offers 0% for the first 18 months on balance transfers (after, 19.24% - 29.24% variable APR; balance transfers must be completed within four months of account opening; see rates and fees) and 2% on every purchase with unlimited 1% cash back when you buy, plus an additional 1% as you pay for those purchases. Plus, for a limited time, earn 5% total cash back on hotel, car rentals and attractions booked on the Citi Travel℠ portal through 12/31/24.
Above all, Lacy advises that you lean on your support systems and remember that your situation is temporary.
"There were days where I was crushed, and my wife uplifted me," he says, "and vice versa. We just kept encouraging each other through that."