Surviving a Job Loss in Tough Times
Needless to say, it never is a good time to lose your job. In the current market, however, one of the major fears faced by homeowners at risk of foreclosure or not is downsizing and layoffs.
The unemployment rate keeps creeping up. In December, it jumped to 7.2%. Over half a million (524,000) people lost their jobs, and according to media reports is the highest level in 16 years. That is why counselors stress the need to be prepared for the worst and understand the risks of related emotional and financial strain.
"Stalwarts of the American economy have laid off workers by the thousands. Financial setbacks are never easy, but with help, most can survive unscathed," said Gail Cunningham of the National Foundation for Credit Counseling, Silver Spring, Md. "Reaching out to a trained and certified credit counselor can be one of the smartest steps a person can take during times of financial distress."
NFCC job-loss surviving tips start with the sensible advice to allow oneself "to be upset or even afraid," since these are natural reactions that hopefully do not become so intense that professional help is necessary. Hearing another person's perspective can bring relief, and a positive outlook.
NFCC suggests the first step should be to consider all assistance options, such as getting references for a future job, taking advantage of any workplace assistance available such as placement assistance, job retraining and severance packages. The human resources representative at work can also be a good resource of information on applicable government benefits.
The psychological aspect is as important. "Resist the urge to solve your problems by spending recklessly. Don't be tempted to live off of your credit cards." It is tempting for someone with a good line of credit to support the family at their current standard of living by using credit, but nobody can predict how soon a new job will come along. NFCC experts have calculated that job seekers should expect one month of job search for each $10,000 of annual income they hope to replace. For example, those seeking a $50,000 salary may need five months to land that job.
As important is to take a personal inventory, consider all assets, income and expenses before budgeting or deciding whether it is necessary to liquidate any assets to be able to survive. Meanwhile, experts agree that drastic times call for drastic measures, thus nothing should be off limits, which may mean unpleasant measures like selling the second car, recreational vehicles, real estate holdings, rental properties or jewelry.
Budgeting based on a careful review of income vs. debt obligations should be done aiming to pay everyone, and yet keep priorities straight. Rent, mortgage, utilities, childcare, insurance premiums, health care, food and keeping gas in the car come first.
Then have a family meeting that includes the children since a joint effort yields a greater result, as does knowing that this austere lifestyle will only be temporary.
Part of the process is tracking down all spending to every cent spent and reviewing it at the end of 30 days.
NFCC also suggests it is a good idea to negotiate by contacting creditors to arrange lower payments, or temporarily reduce interest rates, since most major credit card issuers have in-house help programs once they know the situation. Similarly, mortgage lenders and servicers can help once they are informed of the situation based on documentation showing the job-related setback.
Lenders and servicers need to keep in mind the average consumer does not know all of the loan modifications available, NFCC said. So it benefits everyone if homeowners in job distress first sit down with a certified housing counselor and map out a plan to make sure they select the best option to the situation at hand.
NFCC members annually help over two million consumers through its 900 community-based offices nationwide.