Smart Money Decision You Should Make While Unemployed
Losing a job is catastrophic; especially since finding a new job is not going to be easy. Accomplishing financial stability while unemployed is simple if you spend less, have self-discipline, creativity, and planning. It is hard to know how long you will be unemployed. You may find a new job within weeks, or it may take you months. However, financial experts advise everyone employed or not to plan for six months of unemployment. You may find a job sooner, but it worth to be prepared. Here are the smartest money decisions while unemployed:
Draft a Survival Budget
Draft a survival budget by listing your unemployed income and expenses. Eliminate all unnecessary expenditures to come up with the necessary income to survive. After finalizing the plan, start looking at the procedures to reduces expenditures and ways to increase income.
Ways to Reduce Expenses
Increase deductibles on auto insurance to reduce the premium monthly payment.
Sell your car to save on the monthly payment and maintenance.
Selling your car will help you to save on gas, insurance and raise a large amount of cash quickly. This will depend on whether you own your vehicle or have a loan on it, and the value of the car.
Discontinue discretionary expenses such as magazine subscriptions, additional phone services, credit cards you do not use with an annual fee, health club memberships, auto club memberships, cable television, and Internet service.
Reduce contributions to retirement or education funds.
Stop contributing to any savings plans that are not necessary. These include retirement funds, education funds, and Christmas club accounts.
Negotiate with the creditors
Assuming that you have good credit, you may find it relatively easy to reduce the interest rates on your credit cards, skip a payment or two on your car loan, or reduce your monthly payments temporarily. Some creditors will turn you down, but most will negotiate with you. Do not wait until you miss more than one payment and the creditors are calling you, you will have more trouble making your case. If your creditor agrees to let you skip payments or pay reduced amounts, honor the terms of the agreement, and keep in close contact with your creditor's representative. Otherwise, you may ruin your credit.
Establish a home equity line of credit Consider setting up a home equity line of credit, if you have enough equity in your house. With a home equity line of credit, you will pay interest only on the portion you use. However, the bank may charge you an annual fee or require that you take a certain draw on the lineup front. You may even be able to use the line to pay off credit cards or loans that carry a higher interest rate and consolidate your debt. Use caution when using your house as a debt management tool. If you cannot pay your loan back, you may lose your house.
Ways to Increase Income
You can receive unemployment benefits if you meet the eligibility criteria’s. The most important criteria are the involuntary unemployment, which means that you have been laid off or fired but not for misconduct. If your application is approved, you should begin receiving benefits within a week.
If you were laid off, you might be eligible for severance pay. You may have the option of receiving benefits as a lump-sum payment or as a continuation of salary.
All financial advisors say that any person must have an emergency fund equal to six months of living expenses. This would be a great source of income if you planned.
If you signed up credit insurance in the past, it would come handy. This insurance will cover the bill payments when you are unemployed.
Part-time job Take a part-time or temporary job to supplement your income. Taking a part time job will help in two ways; first, you will feel less with some regular income. Second, you may parlay the part-time into a full-time job.
Have a garage sale
If you look around the house, you will find much stuff that you do not need. Get rid of the extra stuff and keep some cash.
Withdraw money from your tax-deferred retirement account Withdrawing money from your IRA is an option you should consider only as a last resort to avoid bankruptcy
Borrow from the cash value of your life insurance policy
You will have to repay the money, but not right away.