(NewsNation) — The unemployment rate remains low at 4.2%, but data suggests millions of Americans are just a job loss away from serious financial hardship.

A recent Bank of America analysis found that more than a quarter (26%) of American households live “paycheck to paycheck,” spending over 95% of their income on necessities.

Even more people, nearly 60%, are uncomfortable with their level of emergency savings, according to a 2024 Bankrate survey.

Here are some budget tips to consider if you find yourself unemployed.

Evaluate your current financial situation

Start by tracking your expenses so you know where your money is going. Look at previous bank statements and separate your spending into two main categories: needs and wants.

Needs are essentials like rent, utilities and food — the things you can’t live without. Whereas, wants are expenses like entertainment and travel — which aren’t required to survive.

After taking stock of your expenses, figure out how much you have saved. Ideally, your emergency fund should cover three to six months of expenses, though 27% of Americans have no emergency savings at all, according to Bankrate.

Compare your savings to your monthly expenses to determine how much additional financial support you may need to get by.

Build a new budget around your reduced income

Once you understand your savings and expenses, build a new budget with your reduced income in mind. Ask yourself if there’s spending you can cut to stretch your savings and prioritize your “four walls”: food, utilities, shelter and transportation.

A common budgeting tip is the 50/30/20 rule, which suggests allocating 50% of your after-tax income toward needs like food and rent, 30% towards wants and 20% towards savings and debt repayment each month.

During hard times those percentages will likely change, with a larger share of your budget going toward needs and less towards wants and savings.

Make sure to factor in any unemployment benefits or severance pay into your new monthly budget. The average weekly unemployment benefit in the U.S. was $453 as of November but that varies widely by state.

Try a free budgeting tool like this one to keep your finances on track.

Consider hardship options

If unemployment causes you to fall behind on your credit card payments, there are steps you can take to make the bills more manageable. Card issuers are often willing to work with struggling borrowers by extending due dates, waiving late fees or reducing minimum payments. Call your creditor and explain your financial situation.

Your mortgage servicer may also be able to help you avoid foreclosure if you fall behind on your payments. There’s a nationwide network of housing counseling agencies that can help you understand your options. Find out more here.

While not ideal, tapping your retirement savings is another option. Depending on your situation, you may qualify for a hardship withdrawal which allows you to pull money out of your 401(k). However, those withdrawals are typically taxed as ordinary income and you’ll likely face a 10% early withdrawal penalty before age 59.5.

Look for additional sources of income

Recent Labor Department data shows the average unemployed person spends around 24 weeks unemployed, or roughly five months.

In other words, finding a new job can take some time, but that doesn’t mean you have to get by without income.

The gig economy has made it easier than ever for people to find flexible, temporary work like driving for Uber or delivering food for DoorDash. Online freelance gigs also offer an opportunity to generate cash while keeping your skills sharp.

Keep in mind: gig work can impact your unemployment benefits depending on where you live. Some states may allow you to earn a limited amount from gig work without impacting your unemployment benefits, while others don’t.