A loss in the steady income stream, especially in the current Covid-led economic fallout, can have adverse effects on employed professionals. Even if you are currently secure in your job, It is imperative to be well-prepared for the worst. If you ever find yourself out of a job, here are the three tasks you should prioritize to manage your limited funds.
Assess your finances
Once the initial panic fades away – sit down and assess the status of your finances. This will help you see where you are at financially. List your monthly recurring expenses (covering both the fixed and variable). Apart from the basic utilities, this might include payment for loans, credit cards, insurance, medical support, property taxes, retirement accounts, recreation, etc. Your previous expense records can provide you with an estimate. Assess what quantum of funds these categories demand.
As you analyze your expenses, figure out what you can afford to allocate to different buckets. Note how much you have saved up and sum up your passive sources of income. Don’t worry if it’s not that significant – the goal is to have a clear picture of your inflows and outflows.
Create a strict budget – and stick to it!
Budgeting is a key milestone that can help you monitor and take charge of your money matters. It will provide you with a plan to spend your limited income. Since you don’t have a consistent source of income, cut out all the non-essential (discretionary) expenses – dining out, shopping, makeup, Netflix and prime subscriptions, and vacations. If emotions are clouding your pecuniary decisions, remember you need to compromise on these only until you find your next position. Also, steer clear of unsecured and unnecessary debts if you’re finding it difficult to even afford basic amenities. Remember, you’re spending from a limited and a small pool of money.
File for unemployment
Fortunately, the State unemployment office provides financial assistance to a large mass of unemployed people (who meet the requirements of eligibility). It accords the eligible claimants with half of the amount they’ve earned at the job each week for a period of 26 weeks. So, filing an unemployment claim is the foremost task to be done at the moment. It can be approached both by meeting in person or submitting an online application. Collect the records of your income for the past 18 months to derive maximum benefits. You will be asked for a whole lot of paperwork, but eventually, the compensation will help you meet ends.
In case you are lucky enough to be holding a job, here are a few reliable ways in which you can cushion yourself from an inevitable financial crisis.
Being prepared in case of unemployment
It goes without saying that the best time to prepare for unemployment is when you are still employed. Studies reveal that only 4 in 10 Americans have an adequate savings fund to rely on in an emergency. This suggests that millions are in need of financial advice. So, let’s discuss the strategies you should adopt right from today to protect you and your family in case the economic climate of unemployment takes a toll on your lifestyle.
Invest in passive income sources when you have a job
Passive income refers to the money that a single-time investment continually generates without having you to monitor its holdings.
The most sought-out and preferred options to get long-term returns are:
• Renting out your unused space/property.
• Real estate investment trusts (REITs) as an alternative to managing rental properties.
• Dividend stocks where you can enjoy a particular share of the company’s profit.
• Investing in mutual funds that are associated with a particular market index.
• Engage in the peer-to-peer lending/crowdfunding industry.
• Fetching interest from investing in precious metals.
Apart from the ways mentioned above, you can also take up some side hustles that will add to your income. There are a plethora of opportunities like freelance writing, blogging, building apps, affiliate marketing, network marketing, designing T-shirts, creating a course, and many, many more!
Managing your finances from the get-go
If you find that you are earning well but are still unable to save enough, then you need a plan to control where your money is going. As discussed in the previous section, a budget is a powerful tool to keep paycheck-to-paycheck living at bay. Create and stick to a budget that is best suitable for your monetary goals. Plus, give equal importance to the emergency corpus as it will serve as a safety net if your finances turn off-kilter. You can also try your hand at budget tracking applications, which warns you every time you exceed the predetermined limit of a specific expense. There is no denying the fact that with a sound money management system in place, life will be much easier.
Prioritize your debts
It is quite common for credit card owners to lose track of their debt repayment, but the consequences are hard to handle. So, plan and prioritize your debts well in advance. It can be demarcated into the following types: priority debt, non-priority debt, and debt emergencies. The most accepted approach is the “debt avalanche” method in which debts are sorted by the interest rates. Make sure that you initially repay your debt with the highest interest rate. On clearing that, work to pay the second most expensive one. It is advisable that you pay down your debts now so that if you suddenly lose your job, you are prepared to handle it.
Sure, nobody wants to face the pink slip in our career. But if things go sour, it will do you a whole lot of good to be prepared in case you face an unprecedented setback! Apart from financial planning, you could try to boost networking as it will provide you with quicker updates of vacant job profiles. Utilize your spare time in upgrading skills according to the changing roles and always be on top of things!