One of the most unnerving aspects of losing your job is facing the need to consider how to meet your continuing bills and debt obligations. Without a permanent position, how will you meet your month to month bills, mortgage and debt repayment instalments?
That is a fair question that raises your level of stress. Given the prevailing economic environment, that is also a fair consideration to contemplate even when in a “secure” job. This article highlights some possible approaches to handling such a difficult period in your work career.
Ensure that your entire household is aware of your circumstances and recognises the need to augment the household income and to conserve cash. Children (and dependents) in particular, should be drawn into suitable discussions in order that the normal expectations of the breadwinner can be appropriately tapered. Dependents will need to play a more supportive role in the days ahead.
Make a comprehensive list of all payments: rent/mortgage, vehicle and other loan instalments; credit/store card payments; utilities and other household support bills; insurance and so on.
For each debt, list the outstanding balance, the monthly instalment, the interest rate and the expected date the debt will be repaid in full. This may involve calling your creditors to ensure that this information is correct. This call also provides an opportunity to advise them about your situation.
Consider which of your assets may provide survival cash starting with cash saving deposits, stock and bonds; add valuable items in your home onto the cash value in insurance policies and the equity in real estate.
Prepare a monthly cash flow projection of what you can pay and when. Set priorities on rent/mortgage, food, utilities, health care and medical insurance. Where there is major shortfall in the cash required, cuts should be considered first for discretionary expenses like cable TV, mobile phone expenses and other recreational costs. If necessary, only the expenses needed to survive the period should be included.
With such a full review of your financial situation, you are now in a position to negotiate with your creditors where it is not possible to meet the minimum instalment. This is one of the most important steps in releasing some of the pressures of worry about your finances. Calling your creditors early and letting them know that you cannot pay or can only pay part of the instalment required encourages the cooperation of your creditor. It is also important to have a written commitment to any agreed changes with your creditor(s) when the negotiations are completed.
Based on the results of these negotiations, it is time to revisit the cash flow projection and make any necessary adjustment in order to meet the demands of creditors while “surviving” at the least. Once complete, this projection then serves as a road map to financial actions in the future.
The way to deal with being out of work is to seek actively a similar or better position. Yet, that may take time during which you and your family must survive.
This may be your best wake-up call especially if you have never done a comprehensive review of your finances before. The best way of reducing the worry calls for that review and once done, even when back in full-time work again, your understanding of and approaches to your personal financial condition will be more careful.
Louise Fairsave is a personal financial management advisor, providing practical advice on money and estate matters. Her advice is general in nature; readers should seek advice about their specific circumstances.