Tips on Debt Management And Paying Down Debts After Losing Your Job

The loss of a job can bring a variety of challenges and stresses. Of course, after losing a job your primary concern is getting back into the workforce as soon as possible. But in the meantime, you will likely need to take some proactive steps to minimize your debt until things turn around for you. Read the following article which provides great times on debt management, and help on paying down debts after job loss.

Example of credit card debtMake An Assessment of Your Current Finances

For example, one of the first things you can do is fully assess your current finances. You can look closely at all of your expenses and begin to trim those which are not necessities. In other cases, you can actively seek to reduce the costs of certain services, such as your cell phone by switching to a cheaper plan, or finding more competitive auto insurance.

While on their own, each individual cut may not seem like much at all but taken all together you could see some meaningful savings. If you save 5 dollars on 5 services, that’s $25 per month, or $300 a year.

If you find certain perks that are costing you monthly, getting rid of them can help you save enough money which you could be put towards your current debt until you find another job.

Take Advantage of Unemployment Benefits

Don’t be afraid to take advantage of the unemployment benefits to which you are entitled. But be sure you get in touch with the unemployment office as soon as possible because it takes time to get your claim processed. Obtaining monthly unemployment benefits will be one income stream that will help you stay above water and depending on the amount you are entitled to receive you can continue putting money down towards your debt.

In a best-case scenario, you will be able to ride out the storm and start to chop down your debt when you are once again employed. However, if the amount you owe your creditors becomes insurmountable, declaring bankruptcy can help you develop an effective debt relief program so you can get a fresh financial start.

Seek and Research the Right Financial Advice

Person researching for financial adviceDebt is stressful, it can impact all areas of your life and it often feels overwhelming especially if you lose your job. It’s important to know what to do about the debt and to understand how you can prevent future financial problems.

Below are a few different pieces of advice that may help:

1. Learn to Budget

The biggest thing that many people overlook is the important act of creating a budget. You’ll be shocked to find out how much you “accidentally” spend on a monthly basis especially if you’ve audited your spending habits.

2. Cut back on what you don’t need

There are plenty of frivolous ways that people spend money – many of which have far less expensive alternatives. For example, maybe you spend $3 per day grabbing a coffee on the way to work, when you could brew it at home for just a few cents per day. You can also seek cheaper gas. There are many websites and apps to let you know which gas station in your area that provides the cheapest gas. Over a period of a year, you’ll realize that all the little things add up and that saving those pennies really can make a difference.

3. Identify expensive debts

How expensive your debt is depends, to a large degree, on the interest rates. It’s often wise to pick those high-interest debts to eliminate first, since they’re adding the most new debt every month. Tackling your largest debts and getting them under control first is a great feeling and tends to make your other lesser debts appear meaningless or much easier to pay off – and they are!

4. Be honest with your spouse

If you’re married, don’t lie about your financial situation or try to hide the issues. Be open and transparent. Have that uncomfortable conversation. This way, you can both make changes and work together to find a solution.

5. Be careful with your credit cards

One tip is to keep careful track of your income and your expenses. Credit cards should not be used casually, as though they are an infinite source of spending money. They are not. When credit cards are used casually, without tracking income and expenses, the balances due increase, and with them, the interest that you have to pay.

6. Research your options

Above all else, be sure you understand all of your legal options for debt relief. In some cases, this could even include bankruptcy, which can provide you with a fresh start, and in other cases you can highly benefit from debt consolidation or debt settlement services.

These are just a few ideas that can help you stave off debt as you search for that new job but if you were already carrying debt prior to becoming unemployed, it is very easy to fall into true financial hardship. This is why when job loss occurs you need to really clamp down and spend the next few months doing everything you can to fix your financial situation. Do not ignore the position that you’re in because if you do it’s only going to get worse, and eventually come back to haunt you. You know this.

Practice Budgeting & Financial Planning

Most people experience debt problems of some kind within their lifetime. Correspondingly, most people can gain value from good debt management practices.

Monthly financial planning calendarIt may seem time-consuming, but it is best to write down all of your expenses and all of your income in a ledger, along with the amount of interest that you need to pay. That way, you will always know how much you have and what you can afford to pay for. Both amounts may be less than you would like, but at least they’ll be realistic.

Additionally, you’ll want to put together a budget. First, list your income from all sources for each month. After that, list your necessary expenses, like your home, utilities, groceries and health care.

Once you’ve done that, you’ll be able to look at what is left of your income for each month and determine how much you want to save and how much you will spend on unnecessary items, like entertainment. When planning to do some spending with a credit card, you’ll also need to figure out how much interest you’ll be paying and include that in your budget.

You’ll also want to include payment of debts in your budget. Some people like to pay off the highest-interest debt first, because that is the one that will keep draining your resources the most until it is paid off. Others may choose to pay off a small debt first, perhaps one associated with a necessary service like phone or internet services.

Once you decide on an approach, stick with it, and enjoy seeing your debt get smaller and smaller as you pay it off.

Most consumers may run into credit problems from time to time, whether due to excessive spending or insufficient earning. When that happens, it is important for the consumers to know how long they will be adversely affected by those credit problems and the debt management strategies they can avail themselves of.

Try to Pay Off Debts Quickly

If you miss a payment that you owe, and are 30 days or more late, that is a delinquency and can be added to your credit record. It is good to avoid delinquencies in the first place by keeping track of when your bills are due and paying them early; however, if you do have a delinquency, the best thing to do is to pay it immediately. You may be able to get the company to which you owe the money to drop their late fee in return for you paying as soon as you agree to do so.

Use 30 Percent or Less of Your Credit Limit

High credit utilization – using a high percentage of your credit limit – can also be a negative on your credit record. For that reason, it is best to only use 30 percent or less of your credit limit. If you use too much though, and then pay down your balance, the problem should be overwritten a month later since balance updates are sent to the major credit card bureaus by credit card issuers each month.

Account charge-offs, however, will be on your credit report for seven years. Account charge-offs happen when you fail to pay your debt to the person or entity to which it is owed in accordance with the agreement that you made with them. You can pay of that debt in full, or negotiate a settlement, which will preclude the risk of being sued for the money.

Create an Emergency Fund

When it comes to job loss, not having an emergency fund that has enough cash in it to cover all of your living expenses for six to 12 months, could damage your finances enough to put you into a financial whirlwind. Therefore, if your job is less than 100 percent secure, cut unnecessary expenses and start saving everything you can until you have that six- to 12-month reserve fund. Not making that happen is a bigger risk than anyone should be willing to take.

Your financial planning should also involve saving as much money as you can. Putting a regular amount into a savings account every time that you get paid is one of the simplest things that you can do and also one of the wisest. Doing your taxes early is good idea too, so you will know how much you have to pay, how much you can save, and how much you can spend.

Example of monthly family financial planning chartIn a related challenge, which is another good reason to save as much money as you can every month, is that even if you keep your job, you may find yourself with less work hours and thus with less work income. This happens to people all the time when companies find themselves with less revenue and immediately look at what labor hours they can cut.

Employees that do great work can make a case for keeping all of their hours, at the expense of employees who don’t do great work, but often cuts hit everybody so again it’s wise to always be prepared for them.

Don’t Continue to Run Up Debt

After losing a job it’s highly advised not to continue running up your debts. Some, like those associated with unexpected medical expenses, may be unavoidable, but others however, like credit card bills, are very avoidable so consider using a debit card instead and only spending what you actually have, with even that being very carefully budgeted.

Reduce the Chance of Identity Theft

It’s wise to determine how susceptible you are to identity theft. In 2017, one of the largest credit bureaus in the country, Equifax, was hacked into which exposed the private personal information of up to 145 million Americans to criminals. Some Americans froze their credit because of that. Others, however, did not.

Those who did not may have presumed that if they didn’t experience any apparent problems from identity theft right away, that they wouldn’t experience any later either. However, they may find out the hard way that they are wrong.

A good rule is that if you believe that there is any possibility that you may be a victim of identity theft, you should take every possible measure to protect yourself right away. A part of that task is checking your credit report for suspicious or incorrect information. Another thing you can do is to change any insecure passwords you may have.

The Take Home

When it comes to job loss and being in debt, it’s not the end of the world, but If you find that your debt is simply too overwhelming to handle, bankruptcy might be your best option. A bankruptcy attorney can provide you with additional information and help you determine if this is the right choice for your financial situation to do everything you can to stay afloat but if it becomes to hard, find a trust bankruptcy lawyer in your area and get the help you need from them.