In today’s job market, there is a chance that someone you know is unemployed. It’s possible that, for your friend or family member, this period of unemployment has gone on for longer than a month or two months. Current unemployment rates show that they may be unemployed for nine months or more.
If you’re faced with long-term unemployment, what’s your plan? Do you have one in place? How will you survive financially?
The road ahead might be filled with bumps and turns, but having a plan in place will help to smooth the way when times are tough. Here are a few things you can do to help plan for possible long-term unemployment.
- Create an emergency fund for yourself in the event of long-term unemployment.
- Prioritize your household bills, paying the most important ones first and on-time.
- Find out what your minimum payments are to extend your resources.
- Check with lenders on forbearance and deferment plans.
- Cancel or suspend any entertainment or non-business related expenses.
Create an Emergency Fund
For those currently employed, see if you can set aside enough money to have three to four months of emergency funds. This will help with any expenses that are over what an unemployment claim will pay. When people who are eligible for unemployment insurance lose their jobs, the governments pays them an average of $300 a week for 26 weeks or until they get jobs; keep in mind that the average length of unemployment in the United States today is 39 weeks.
Prioritize Your Bills
Identify which bills are your “must” or “need to” pay bills during a period of long-term unemployment. This will vary from household to household, but typically the must pays are health insurance, car insurance, rent or mortgage, and the phone bill (either a landline or a cell phone). Eliminate all other expenses where possible, like gym memberships (make sure to check your agreement), DVD rentals, online membership fees or other dues.
Know Your Minimum Payments
Make sure you are able to pay at least the minimums on your credit card bills every month. If you are still carrying student loans, make sure to pay those loan bills for as long as you are able to. Knowing what your minimums are will help you to keep your good credit should you lose your job.
Forbearance and Deferment
Long-term unemployment could mean that there is a risk of foreclosure on your home. Your mortgage lender may have a forbearance program in place where you can pay a fee in order to delay a foreclosure. Other loans, such as student loans, may be placed into unemployment deferment; the unemployment status means that interest won’t accrue on your loan.
Have a Financial Strategy
Should you become unemployed, try to save five to ten percent of your unemployment insurance checks. This extra money in your savings account can help you to be in a better position for long-term unemployment. Suspend any recurring entertainment expenses, such as satellite radio for your car, a monthly fee to a music download service, or online streaming video services. Delay making upgrades to items such as cell phones or computers. Network with your circle of family and friends to find vendors who are able to provide discounts or other price breaks.
Everyone’s situation is different, but having a plan in place for a “what if?” event such as long-term unemployment can help you to ensure that the road ahead of you won’t be as bumpy financially.