While the national unemployment rate has improved, dropping to 7.8 percent in September, an estimated 12 million persons are still unemployed. Counselors with CredAbility work with consumers who have lost their jobs and help them manage and preserve their credit during these challenging times.
"Managing your finances during unemployment is critical," said Deatra Riley, financial education manager for CredAbility. "The search for a new job can take months, and even when you find a new job, it may pay less than your previous one." Riley also recommends that consumers who are unemployed take special care to protect their credit because good credit is a requirement for several jobs. "Failing to manage your finances during unemployment could affect your credit report and hurt your chances of landing a new job."
As part of its education mission, the national nonprofit credit counseling agency teaches classes on money management. Below are some money management tips to help people through a period of unemployment, as well as long-term tactics to implement once they have a new job.
Short-Term Money Management Tips
People who have recently lost a job should determine if they are eligible for unemployment benefits from their state Department of Labor. While state laws vary, many people are eligible for unemployment benefits. Even people who received a severance package may be eligible after waiting for a certain period of time to apply based on the amount of severance received and the guidelines for the state where they reside. If you have exhausted your state's general unemployment benefits, you may be eligible for extended benefits. Once you have lost a job, consider the following tactics:
Make looking for a new job your full-time job and have an action plan that involves selling yourself to potential employers. Since sales is a numbers game, set a goal for the number of people you will contact, network with or jobs that you apply for in a day or during a week. Striving to reach that goal is a way to motivate you that will lead to a job offer.
Consider enlisting a family member or friend who will check your weekly progress. This person can also help keep you motivated if your job search doesn't proceed as you originally planned.
Manage your stress level while you are unemployed. Look for methods to control your stress and implement healthy stress relief techniques including exercising regularly, eating nutritiously and monitor your thoughts and avoid negative self-talk.
Assistance is available to help you manage your finances. For example:
Call United Way to find out about other low-cost services, such as day care, or rent and utility assistance.
If you are paying off a student loan, contact the student loan servicer company to defer or reduce your payments.
Ask your financial company servicing your automobile loan if they have a plan that allows you to skip one or two payments now and add them at the end of the loan. This is called extending the loan.
Make at least the minimum monthly payments on your credit card accounts. If that is impossible, contact your creditor in writing, explain your loss of income and advise them when you will be able to resume making payments. Keep copies for your records.
If you cannot make your mortgage payment, contact a HUD-certified housing counselor at 1-800-251-2227.
Consider downsizing your lifestyle by reducing expenses such as club and gym memberships, cable television, bottled water, magazines and movies. Find ways to reduce "everyday" expenses, such as telephone usage and dining out. For example, families with cell phones for each person may not need a land line and cooking all meals at home could easily save a family hundreds of dollars each month.
Long-Term Money Management Tips
Many people now unemployed formerly worked in high-income professional jobs, such as those in the mortgage, real estate or securities industries, and may not find a new job paying as much money. They should consider a change in their lifestyles to meet their financial obligations in the future. Here are some tips to do that:
Develop a new, realistic budget that will enable you to pay for essential expenses and bills before any extra or luxury items. Consider developing a budget so you can live on 70 percent of your new income, with the remaining 30 percent used for saving and investing for the long term.
Consider selling your car, especially if you have a high monthly payment, and purchase a less expensive model for cash. Utilize the money that would have gone towards your car payment to go towards paying down debt or towards building your savings.
CredAbility serves clients in all 50 states plus the District of Columbia, Guam, Puerto Rico and the U.S. Virgin Islands, in both English and Spanish.
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