Even though you work harder to be in good books of your employer, the possibility of a layoff lurks around. Employers do not warn employees before downsizing that results in an appalling and painful experience. Many people struggle for months to land a job and worse if they find it outside of their career field. Being redundant for such a long time may ruin your financial life.
Unemployment is a temporary phase, but you do not know how long it will sustain. Quick loans for unemployed can help you tide over but not for a very long time, and what if you stay jobless for months? Therefore, financial experts suggest that you should set aside money for a rainy day. The repayment length of loans for unemployed is very small and they are paid back in a lump sum. While you have to meet your day-to-day expenses, you will pay interest on top of what you owe. It means an additional burden. If you fall behind repayments, you may fall into debt.
Start with an easily attainable financial goal
First off, you should not let your spending take away the whole of your monthly salary. Savings are a must. The rule of thumb says that you should have three months worth of cost of living. Of course, setting aside such a big amount is not very easy. It may take forever. You should start with a small financial goal. Make a target of putting aside at least 10% of your salary every month. Make sure that you meet all of your recurring expenses out of the rest money. Try to avoid dipping into your savings for your impulsive buys. Once you achieve your first goal, set a higher target and try to achieve that.
Trim down your spending
If you want to achieve your goal, you should try to cut down on the size of your spending. During unemployment, cash inflows get halted and you rely on savings for your regular expenses. Despite having a side gig, it becomes difficult to avoid dipping into savings. You are likely to come across an emergency expense. If you whittled down your expenses, your emergency cushion would be larger. Start with cutting down unnecessary expenses such as gym membership, magazine subscription, dine outs, entertainment and the like. The best way to avoid discretionary expenses is creating a budget. Make a list of all your income sources and expenses. Make sure that your expenses are lower than your income. Go through your expenses and cut down on what is unnecessary. This will help you boost your net worth.
Pay off your debts first
Do not forget to give priority to your debts. If you have taken out any kind of small loan, you should settle them as soon as possible. Do not be slugging with repayments. Otherwise, you will end up paying late payment fees and interest penalties. During unemployment, you may have burden of unemployed loans and if you have already bearing the pressure of debt, it will be extremely difficult to manage your finances. If you have been paying a mortgage, you can ask your lender to be flexible with repayments unless you land a new job. However, this is possible when you have been making payments without any delay. Lenders can also reduce interest rates to make easier repayments.
Be careful with the use of credit cards
A credit card is the easiest source of paying for any transaction when you are running out of money. You should be very careful with the use of credit cards as they quickly add up the debt. The reckless use will result in max out that not only pulls your credit score but also reduces the chances of getting a loan at a lower interest rate. If you needed to take out a loan for unemployed, you would get the best deal only when you had a good credit score. A lender will look over your credit report before signing off on your loan application. The higher the score, the better deal you will get.
Increase your earning ways
You must have a side hustle along with your job. In case, you lose your full-time job, you will have a side hustle to help you meet all of your regular expenses. You must remember that a lender will allow for unemployed loans only when you have some source of income to pay off your debt. Try to generate a fixed source of income like rental income or become a freelancer and handle multiple projects. The more projects you have, the higher the income is. Chances are you do not get projects frequently from your clients. In such situation, you should grab any work like cleaning a house, walking a dog, delivery services etc.
The bottom line
To withstand unemployment, you should set a financial target, trim down your spending, set aside money every month, avoid maxing out credit cards and increase your earning ways.