People that have been unemployed for some time are slowly getting back to work. However, for some people the damage to their finances has already been done while they were out of work and now they are looking for debt relief to get back on track.
According to recent government figures, the average length of time a person is unemployed for is about five and a half months, and during that time a lot of damage can happen if a person is relying on credit cards, cashing in on their savings and even using some money that was being put aside for retirement.
However, overall there are various debt relief strategies that can help people to get back on track.
No. 1 for those who have just re-entered the workforce in California and elsewhere is a change of thinking. This change needs to move away from survival mode and into planning ahead for the future.
The first piece of advice is for a person to put together a budget that fits their current salary. And, in cases were there has been a decrease in pay from this current job to the job before, it’s important to remember that lifestyle changes will need to be made from the way spending was before the layoff.
After budgeting, it’s a good idea to also build-up cash reserves that would pay for between three and six months of expenses. This way if a person is laid off again, he or she has at least a cushion of money to fall back on, instead of going back to relying on credit cards and retirement accounts.
It’s also highly advisable to start paying off credit card debt. And while some people like to pay off the cards with the lesser amount owed first, most agree that it’s actually best to pay off the credit cards with the highest interest first. But, regardless of what makes a person feel the most comfortable, it’s just important to start paying down the debt.
And finally, resist the temptation to make any big purchases unless you absolutely need to. A new car or family vacation can wait, and special treats can be a nice dinner out as opposed to a trip to Disney Land.
Overall it’s important to keep in mind that returning to financial stability after unemployment is difficult, but with the right amount of effort and time, it can happen.
Source: The Republic, “How to rebuild finances after losing on job, finding another,” Eileen Ambrose