We were faced with this... sort of... on December 6 2007, when DH was diagnosed with a golfball-sized brain tumor. He is in the military, so his pay was not affected, but I quit work at the moment he told me, so our income was cut basically in half. And, with five kids on the payroll, that income being cut in half was so astronomically major!
1. We have two new autos, both bought last summer. With both autos I opted for the insurance that will pay the payments for up to 18 months if you're out of employment. And I don't mean, they'll tack the pmts on to the end of the loan, I mean they will pay the payment entirely and you won't have to think about it ever again. It was only like $15/mo... I called up immediately to set that in action.
BUT It was a no-go, because the policy only applies to the primary on each vehicle, which is DH,. If HE lost his job, pmts would be covered, but since it was ME who quit, it was not covered.
HOWEVER, we kept in constant contact with our credit union, who we financed through, and they took notes the entire time as to our situation. It took about a month and a half for the insurance company to finally confirm that we wouldn't be covered, so by the time that came through we were about 45 days behind in payments. BUT because we had been in constant contact & they knew the situation, we were not given a 30-day late on EITHER vehicle.
LESSON: The MOMENT trouble starts brewing, contact your creditors!
2. We mobilized our family, our church, my daughter's teacher/PTA and anyone who might be willing to help. The result was Visa giftcards to cover groceries, PTA moms cooking for us two nights a week while I was ferrying DH back and forth 180 miles/day for rehab, and countless grocery gift cards to help w/ groceries.
3. After about a month, when we realized that the magic surgery he had wouldn't have him "back in action in about two weeks" as his neurosurgeon said, I immediately began downsizing. What could we cut out in our lives??? The biggest thing was RENT and GAS.
a. We were paying $1700/mo for an amazing home in a gated community w/ polished travertine floors, granite in kitchen & bathrooms, granite inlays in the polished travertine,... the works. I was totally selfish and did NOT want to give the house up. We'd lived there a year and a half and sadly, that's the longest I had lived anywhere since I was 18. But, I bit the bullet and knew our longterm financial picture was more important than a house I loved started looking for a house in our town that was cheap, that we could afford on one income.
b. We were driving about 180 miles/day to get DH to his rehab & specialists. Again, it only made sense to move. Even though it was mid-Jan and DD was in the middle of a GREAT school year, I really wrestled with how this would impact her. After a few days of wondering whether I was sentencing her to a lifetime of therapy by moving in the middle of the year, my Mom and her teacher told me to get a grip -- kids are resilient and life happens. So, the search for a cheap hovel moved from where we were living in Temecula to the towns surrounding DH's rehab program & hospital program.
LESSON: Don't be afraid to make big decisions. Do what you gotta do. Kids will bounce back. YOU will bounce back. Anyone that tells you your child is destined for an attachment disorder because you had to downsize your life suddenly and that included a move, is full of hooey.
4. Sell sell sell. In the move, I went through the kid's clothing and got rid of EVERYTHING I could. Ditto for toys. We made a little profit, only $100 or so, but when your income plummets like ours did, it is GREAT.
5. Again, call on your friends & neighbors. When I found the new place, a 2-br townhouse for $1095/mo, only 20 minutes from DH's rehab, I called up Dh's work and asked them to get together about 5 men to help me move. DH was still using a walker at that point, and although he was awake, his brain was basically shut off and he was in lalaland, so I needed help to move. They ended up with 12 volunteers. People WANT to help you! They moved everything for us.
6. Don't start doing creative financing. It will mean lots of hotdogs and ramen noodles and baked beans, but PAY YOUR BILLS. Those that you can't negotiate a lower payment for, don't dismiss them! Pay them anyway.
7. Keep on keeping in touch with your creditors! Twice, our cell phone bill has gone 150-200minutes over our 2100 minute plan. This was due to me calling DH's monstrous family plus mine to keep them all in the loop when he was in hospital, etc. I called Verizon & the first time, they removed the overlimit entirely b/c of the situation. The second time, they split it with me so I only had to pay $75 over the regular bill instead of $150.
8. RENTER'S INSURANCE!!! I got it because I was worried about forest fires or an earthquake destroying my beautiful antiques, but guess what?? It ALSO has a clause that covers a degree of lost wages. THAT was a lifesaver.
LESSON: All those goofy insurance options you can get, that you think you'll never use, like GAP on your car, employment ins for your car, renter's insurance... GET THEM. You NEVER know what life will give you. Three years ago when we married, I never imagined my husband had a brain tumor festering, and by that point they estimate the darn thing had already been growing for a good 4 years.
The BIGGEST lesson we have learned from this, and i am SO glad to have learned it at 25, instead of at 55... STRUCTURE YOUR LIFE AROUND ONE INCOME. If you both work, and you structure your life so that BOTH incomes are needed to cover your bottom line: car pmts,. cc's, house, food, phones... should ALL be such that one income can cover them. The other person's income should be FUN money.. cable, XM radio, eating out, retirement, savings... If you can't fit all your major bill payments into one income, then you are living beyond your means. I though we were living within our means, because we paid all our bills on both incomes with a bit of fun money left over each month. We were living the American dream! We looked like everyone else in the neighborhood -- two nearly-new cars, blah blah. Now I've learned that is NOT living within your means. It's actually overextending yourself because there's NO wiggle room.
We now realize that on two incomes, with five kids on the roster, we can only afford a 2-br townhouse in one of the neighborhoods that others would feel was "outside their cultural boundaries". Money-wise, we could afford the fantastic house we were living in, but we were walking a tightrope we didn't even know was there until we fell off.. if we weren't paying $950/mo for our two beautiful shiny vehicles, we could probably have a bit nicer house. But we have been humbled and we now know what we can TRULY afford.
As for having only one income and losing that one income... I can only offer what I think would work: All the above-mentioned insurances, plus socking away at least half of what you would need for your bottom-line bills each month into savings.
We're moving on, and DH is getting better.. he retires in October, and if he doesn't have a job immediately, I know we'll be ok for a bit because we have that insurance covering our car payments for up to a year