Surviving Debt Despite Unemployment

Although the government reports that employment conditions are improving, it is difficult for us to get back the stability, security and confidence that we once felt. It made all of us cautious of our finances – which is a good thing really.

This is why it is probably a good idea to find out how you can withstand another financial crisis in case it all goes downhill once more. More importantly, you need to make sure you know the steps to surviving debt when you have no money coming in to help pay it off. This is not really about being pessimistic but you want to be able to prepare for the worst case scenario so you don’t find yourself at a loss.

So what do you do when you are faced with another unemployment and mounds of debt?

Debt Survival Tip 1: Assess the situation

The first thing that you have to do is to assess the situation. Although you may be itching to send out resumes, there is no use being hasty. Assessing your current conditions will only take a couple of hours so your job hunting can wait. At this point, everything around you seems like its crashing down and to be able to focus on getting a job, you have to get back control in your life and put it all in order.

Here is when you will need a budget. If you really want to get control back in your life, a budget plan can help you achieve that.

What you want to do is to concentrate on your expenses. Your income is one part of your budget but being unemployed will only depress you so let’s skip that and go on to your expenses. Here’s what you have to do:

• List down all your expenses.

• Start with your fixed expenses that usually have a constant figure every month (mortgage/rent, utility bills, insurance, debt payments etc)

• Next, work on your variable expenses – these are the ones that can change in amount every month (food, groceries, clothing, entertainment, transportation, etc)

• Rank your expenses based on priority.

• Mark the expenses that you can eliminate and live without.

• Make a different mark for the priority expenses that you can reduce further and indicate the lowest amount that you can go.

What you have just accomplished is a budget or spending plan that will tell you the amount of money that you need to raise in order to survive and keep to your credit obligations. By identifying this amount you will know the type of compensation that you will look for.

Debt Survival Tip 2: Grow your income

Once you have a list of your expenses, it is time to take a look at whatever is coming in every month. You need to search for any unemployment benefits that you qualify for. The US Department of Labor website should be able to provide you with a list of benefits available for unemployed individuals like you.

List every income and benefit that you can get. Indicate your savings too if you must. This is an emergency situation after all and if you have put aside the funds for it, then you are very much allowed to use it now. But if you haven’t then do not fret because there are a couple of options for you.

See how your current cash inflow will measure up to your expenses. If you have to trim down some more, do that. Live on a frugal budget while you only have temporary income coming in. But beyond that, you may want to consider the following sources of income:

Work at home jobs

There are many legitimate work at home jobs that you can pursue if the corporate world is making it difficult for you to find work. There are individuals who have successfully built a career from home and that is something that you can do. You can start by thinking of ways to capitalize on your hobby. Here are a couple of examples:

• Cooking/baking. Cater to intimate gatherings of family and friends or even small corporate functions. You can also bake batches of cookies and pastries to sell to friends and neighbors. You can even tap the school cafeteria and offer to deliver your goods on a daily or weekly basis. The popular brand Mrs. Fields started out baking in the comforts of her own home and now it is one of the most well known companies in the world.

• Arts and craft. If you are very artistic, you can create pieces that you can sell online. Create a website to market what you can do and take orders from there.

• Carpentry/Woodworks. If you and the rest of the neighborhood have front and back yards, you can probably make garden and even indoor furniture and sell them to your neighbors.

• Gardening. Some people like to have a garden but they do not have the time to tend to it. This is where you can come in to offer your services.

Online jobs

You also need to know that there are online jobs that you can do. There are outsourcing websites like Odesk.com or Elance.com wherein small business owners post jobs that you can accomplish at home. It is perfect for freelancers and stay at home moms to find work. Here are a couple of options that you may want to consider:

• Writing. Business need website content and with the millions of sites out there, you are sure to find work for yourself as a freelance writer.

• Web developer/designer. Just as a writer is needed for content, web developers and designers are needed to create them.

• Graphic artists. You can actually sell your artworks and graphic designs online if you wish to earn some income and you have the artistic skills.

When you have an income, no matter how irregular it is, you need to keep working hard for it. Take anything that comes your way just so you and your family can survive your unemployment phase. There are people who have come out with better paying businesses that they started from home. If all goes well, you may not even have to find a corporate job.

Debt Survival Tip 3: Deal with your debt

Now the difficult part with unemployment is surviving debt as well. Lucky for you, there are different debt solutions depending on your specific financial situation.

Since you are in an unemployed stage in your life, you need to consider first how much you can raise for your debt payments. This will depend on how well you do with step two. Here are some tips to help you determine what solution is best for your financial condition:

• Debt consolidation. This option will allow you to make lower monthly payments but you need a stable income to support your payments. You will be stretching your balance over a longer period to achieve the lower monthly contribution.

• Debt settlement. If your funds are not consistent and you have a significant amount with you, this can be your option. Your aim is debt reduction by convincing your creditor that you are in a financial crisis because of unemployment. You will tell them that you only have so much amount to offer as payment. Before you send it to them, make sure they give you a written agreement saying that anything your payment cannot cover must be forgiven.

• Bankruptcy. If you really have nothing to offer, you may have to face bankruptcy. This option will eliminate your debts in a matter of months but you will have to suffer a damaged credit score for the next ten years.

Any of these options will help you out of debt but you need to choose based on what your finances can afford.