Job loss can make you feel disconnected from your life and from your routine. It’s important to set yourself up for success so you can avoid future debt problems. This means ensuring you have proper budgeting tactics in place. This will help reduce financial challenges and restore a sense of control to your life.
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Look at your current resources
This may include severance, savings, family income, child benefits, unemployment insurance and so on. Although your severance is paid to you after your employment has ended, it is still considered to be personal earnings. Your severance could affect the amount of EI benefits you receive, as well as the starting date for those benefits. Be careful not to deplete your severance too quickly and see how you can make the most of your resources.
Take inventory of your spending habits
Start by looking at your credit card and bank statements. Think about your daily cash habits and cut out anything you don’t need or don’t use. Typical areas where people cut back are:
- Cutting that gym membership when you hardly even go
- Paying for a landline when most of my calls/texts are come through to your cellphone
- Opt for one streaming service, not 3 or 4
- Reduce the amount of time you eat out and pack a lunch instead
- Plan your meals and shop with a grocery list to help eliminate food waste
- Say no to the newest clothing trends when your current wardrobe can last you another year
- If you have any unused items or clothes at your house – sell them to supplement your income
If you’re looking for help with this step, read our post on how to plan a simple and realistic budget.
It’s substitution, not starvation
It is important to remain socially supported during this time. Don’t deny yourself the social interaction with friends, but perhaps choose an alternative. Try a potluck dinner, movie night in or a games night at home. You may find that your friends are also relieved to have options that are less of a financial burden. The same principle applies for spending on items such as your morning Starbucks. You can still enjoy that ritual cup of coffee every morning, just make it at home.
Run the numbers
After factoring in these changes, list all of your monthly income sources and all of your monthly expenses. Make sure you’re including your debt payments into your list of expenses. Check to see if you have a surplus, are breaking even or running a shortfall (deficit). Deficits can only be run for a temporary period of time before they start to add up and become a significant problem.
If you have extra money left over after paying everyone, pay extra on your high interest rate debt. Paying off your high interest debt first will help you in the long run.
Avoid high interest debt
Using a quick solution like a payday loan may seem like a good idea, but that’s because payday loans are not very well understood. In fact, repeat payday loan users are more likely to say their debt load increased after turning to the payday loan for help. If we actually calculate the annual rate of interest of payday loan, it is well over 500%. If you’re struggling making ends meet, try one of these methods of debt management instead of turning to a payday loan.
The good news is that once you find a new position you can choose to maintain these changes. This will help you recover more quickly, pay down debt and save for the future.
However if you find that these steps are not enough, and you are continuing to feel too much pressure, please feel free to contact us for a free consultation. Our licensed professionals will meet with you in a respectful and confidential manner and help you determine the best possible solution to deal with your debt.