How to deal with losing your job
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With unemployment at its highest rate in years, many people are finding themselves unable to make ends meet. They have gone from having a steady stream of income to not knowing how they are going to pay their bills. In California, the unemployment rate has reached 10.1%. According to the Los Angeles Times the unemployment rate in California is at its highest point since June 1983, and things aren’t expected to get any better before the end of the year.
During a time of unemployment, people look for ways to lower their expenses, but because of the urgency of the situation they often make bad long-term decisions that could be prevented if they only think before they act. One of the most often used ‘financial planning strategies’ for people who are desperate is to take out a debt consolidation loan. In the very short-term, the consolidating of debt from many cards or loans into a single payment seems like a great move. The salesman, I mean loan officer, will explain to you the feeling of freedom you will experience with having only one payment, how your credit will improve because you will be able to manage the single monthly payment and how that payment will be smaller. First, a debt consolidation loan simply moves debt from one place to another, and in almost every case the monthly payment is lower only because the length of the loan is so much longer. The longer term of the loan guarantees you will pay more interest over the life of the loan.
The most dangerous aspect of a debt consolidation loan is the false sense of satisfaction that you have actually accomplished something. In reality you haven’t eliminated any debt, and the feeling of satisfaction is short-lived because unless you begin living within your means you will uncover the bigger concern. If you haven’t corrected the over-spending problem that got you into debt in the first place, you will now be faced with all of those credit cards that were maxed out, that you had vowed to never use again, sitting there calling out to you to use them. If you haven’t corrected your behavior, and you can’t find employment quickly, in just a short period of time by living off of your credit cards, you will have recreated your credit card problem and be right back where you started only now you have a debt consolidation loan and a credit card problem. Research shows that over 70% of the people that consolidate debt end up going deeper into debt within a very short period of time.
So what should you do to if you find yourself unemployed with a mountain of bills to pay? First, realize that you can’t borrow your way out of this problem. Let’s be honest, if you had no debt and you lost your job you would be bummed, but you wouldn’t be desperate. Borrowing is what got you here, so let’s stop using that plan of action. Next, realize that until you get back on your feet you are going to have to do some things that may be uncomfortable. Below is a list of things that you can do to help you stay afloat until you can begin financially meeting your responsibilities.
- Determine if you are eligible for unemployment benefits. Now is not the time to be prideful. You need to make sure you can take care of your family and for a short period of time you may need to accept government help.
- Calculate how long your severance and savings will last. If you have no savings, don’t beat yourself up, but make a mental note to address this issue as soon as you are able.
- Eliminate all unnecessary spending from your budget. Now is the perfect time to see if you really can survive without cable.
- Be willing to take a job that others may feel is beneath you. You would be surprised at the number of people that won’t take a job, simply because they feel they are over-qualified. Remember this is a short-term problem and unless you received a multi-month severance package, generating income has to be your first priority.
- Determine if it is time to make a career change. Is there anything you have always wanted to do? Now may be the time to try and determine what you would like to do with the rest of your life. Taking a class or two may open up a lot of additional career opportunities for you.
Losing your job is never an easy thing to deal with, but as long as you have a plan and a desire to succeed you can overcome even this obstacle. Take this time to really evaluate your situation and focus on what you can do to come out on top.
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