Losing a job puts you in a tight spot. It dishevels the finances, savings, and the ability to make monthly payments. It impacts the potential to understand the best next step to take. Instead, the fear of entering the debt trap consumes one. How would you handle such a situation? Here, you need a financial survival plan to line up the finances and basic payments without worries.
The first thing to plan for is the essential and survival needs. It is therefore about saving enough to cover rent, utility payments, groceries, emergency payments, transport, etc. It may help you avoid missing important payments like rent and facing eviction. The blog discusses the plan that may help you counter the tough unemployment phase smoothly.
How to protect your finances during unemployment?
A financial plan helps unemployed individuals stabilise their finances, reduces anxiety and helps create a path to seek new employment opportunities. Here are some steps that you can take to develop a financial plan.
Step 1- analyse your current finances
The first thing to do is understand your current income, expenses, savings, and other liabilities like insurance. Calculate how much you owe in debt. What are your sources of income? List the aspects like -housing, grocery payments, bills, transport, etc.
Reflect on how much you spend on these aspects and put it against the total income. Understanding how long your savings will last helps you plan ways to earn the money. Most financial experts advise individuals to spend only on essential needs instead of wants.
Step 2- Identify government benefits you may get
The government of the country assists individuals with low income by launching different schemes and freebies. You can identify such aspects on the Citizen Advice portal. You may find benefits like Job Seeker’s Allowance, Universal Credit, Child benefits/maintenance, etc. Also, consider Council Tax (tax credit payments) and rent help (Housing Benefits Payments).
Identify the eligibility and the document requirements for these benefits. It will help you identify the right benefit that you may benefit from. It may take some time to start receiving your benefit payment once you apply for one. Such benefits may not help you cover a major expense; however, they may help you bridge small cash gaps without worries.
Alternatively, if you need more money, you may consider loans for people on benefits from a direct lender online. It may help you fund critical emergency or bridge any requirement as a benefits receiver. You just need to provide authentic proof of the income.
If you have any, provide part-time income proof also. It increases your ability to borrow more of the amount that you need. The only thing is that you should be able to afford the payments.
Step 3 – Create a survival budget
You can create a survival budget by first analysing your important expenses. Prepare a list of costs, like:
- Rent
- Utility bills
- Groceries
- Transport
- Minimum debt payments
Here, non-essential expenses should be paused for some time. If you cannot stop it altogether, try to reduce it. The examples include- subscriptions, entertainment spending, buying clothes, and non-essential shopping. It may help you save money that you can use to pay for emergency expenses.
Step 4- Negotiate dues with creditors
If you struggle to repay the debts, contact your creditors. If you have been regular on your loan and rental payments, some creditors may agree to negotiate. Try to explain why you cannot pay and the reason for your faltering finances.
List the reasons supported with proofs like layoffs, deduction in salaries, and how much you can pay each. It may help you ensure clarity on your part, and the creditor may also understand your situation.
Many loan companies provide repayment options like:
- Payment holidays
- Reduced repayment plans
- Extended repayment periods
Contacting the creditors early after the unemployment or layoff may prove beneficial. It reduces your monthly liabilities and helps you save money. Moreover, it also protects the credit record.
Step 5- Try to reduce the household expenses
Even if you try to improve your income and start earning well from part-time earnings, your financial situation does not change. It is because your spending habits and expenses are the same. You need to ensure disciplined finances to save enough and benefit from earnings.
It is about optimising your finances and planning a budget. Spend according to what you need to meet the important expenses. It may help you spend only on important aspects like medicines, rent, groceries, transport, etc.
Here are some common ways that you can try:
- Switch to a cheaper electricity, gas, and internet supplier
- Cancel unused OTT and other subscriptions like newspapers, magazines, etc.
- Try to reduce or cut grocery spending
- Limit transportation costs.
You may also get some help from the charities and other organisations, such as energy bills, food, and emergency grants.
Step 6- Try to get a full-time job
Well, the government benefits and part-time income may help, but it is not the destination. Instead, you need to work on getting a full-time earning opportunity. Regardless of the reason you got unemployed, start searching for job opportunities.
Update the resume and understand the skills that you need to update. You can use free and paid sources to learn new aspects and nail the interview thing. It is important because you cannot receive government benefits for a long time. It has a specific term. If you cannot prove your efforts to find a job, you may stop receiving the benefits. Therefore, identify the opportunities, update your LinkedIn profile and take help from your friends and family to get a job.
Step 7- Safeguard your mental wellbeing
While these steps may help you, you must monitor your thoughts. Understand what keeps you awake at night and counter the situation. Don’t let an issue linger in your mind for a long time. Instead, get help from psychologists or therapists immediately.
It may help you overcome the feeling of failure, loss or anxiety related to strained relationships. Alternatively, stay connected with your network for job opportunities.
Bottom line
These are some aspects that you may consider to create a financial survival plan. Determine what you can do to improve the situation. Calculate the debt that you owe, and what you can do to pay it off. Negotiate the pending payments with the creditor or seek relief. Such aspects may help you improve the financial situation.
