Losing a job is a stressful period for sure. You begin to feel flustered, especially if you have no passive income sources. Worries overpower you when you do not know how your family will get along. You might find it harder to battle against the emotional storm flooding inside you, but there is a way to pull yourself together.

Remember that job loss is temporary. You may find an even better-paying and satisfying job. Although you know that your job is not secured, unemployment comes as a shock. No employer hints about your termination.

Of course, it is likely that you are not financially prepared for this situation. Your savings might not be enough to get by. Chances are that you wind up in Debt. In order to avoid falling into debt, you should consider the following steps:

• Control budgetary damage

You should review your budget as soon as you lose your job. As no cash is coming in, you cannot continue to spend it the way you have been doing before. Cut back on all unnecessary expenses like your morning coffee from Barista, dining out, entertainment cost, subscriptions, magazines and digital subscriptions, and the like.

In other words, anything you do not need at the moment should be cut off. Once you land a new job, you can come back to your original budget. The budget that just allows you to spend on essential expenses is called a lean budget.

Cutting everything from your budget entirely can be difficult. For some people, it is not realistic either. The purpose is to refuse frivolous purchases. Once-a-month dine-out might be ideal, but not every weekend.

The purpose of revamping your budget is to ensure being able to meet all of your essential expenses. This will help you avoid borrowing money to meet regular expenses. However, you may need to borrow money if you encounter unforeseen expenses.

Based on your unemployment benefits, you can take out loans on benefits today. You are still advised that you carefully analyse your repaying capacity. These small loans are paid off in full within a very short time.

If you fail to meet your obligation, you will end up in debt.

• Talk to your service provider to see if they can cut bills

You can whittle down your bills by talking to service providers if they can shift you to a Lower Monthly plan. Check your mobile or broadband plans, and then visit your service provider’s website to check if they have any other plans with a lower monthly cost.

It is likely that they will simply refuse you by making an excuse that you are no longer eligible for them, but try to explain your financial situation to them and ask them to do your favour until you and a new job. They might consider your case to put you on a lower monthly plan then.

Likewise, see how you can save money on your cable bill. Choose a package that just includes channels you watch and drop off those that you do not watch at all. Choosing more of a basic package will help you save a lot of money.

Cut back on OTT subscriptions, or if you watch only streaming videos, you should cut the cable cord. There is no point in paying money if you do not watch TV.

• Manage outstanding debts

When you are out of work, the most difficult thing is to manage your debts. You are lucky if you have very few credit card bills that you can pay off without being failed to manage your regular expenses, but things become complicated when you have huge credit card bills.

Of course, clearing the dues when you are on benefits is impossible, but you can continue to pay the minimum amount of money. By paying the minimum amount, you will be able to maintain your credit score.

However, paying the minimum amount will cost you more money over time because of accrued interest on the unpaid balance.

You can also think of consolidating your debt. This will make your debt more manageable, and the best part is that you can take out these loans at more affordable interest rates. You will be required to pay down these loans in fixed equal instalments, so there is no way to have borne accrued interest.

As you are unemployed, getting the nod for these loans could be slightly complicated. However, you can still convince if you have paid down all previous instalments on time.

• Take steps to avoid foreclosure

If you have taken on a mortgage, it is likely that the lender will put your house in foreclosure. This can be highly damaging to your credit score, so make sure that you take all the necessary steps to prevent that.

Refinancing is generally considered the best option because it allows you to lower your monthly payment, but this option is not suitable for the unemployed. The best way is to talk to your mortgage lender. Revealing your financial situation will help you get another repayment plan.

Chances are your lender puts you on a payment holiday. Whatever option they come up with depends on your current financial condition. In some cases, a lender may allow you to make a minimum payment, but this will lead to accruing interest on unpaid balances.

To sum up

When you are unemployed, you can easily avoid racking up your debt. Try to revise your budget to ensure that you will not struggle with payments. Talk to your service provider to see if they can put you on lower monthly plans and Manage Outstanding Debts by finding alternatives. It is a good idea to have a considerable size of savings so as to cover all of your expenses from it. However, you will still need to apply for unemployment benefits too. If you still need some money, consider applying for a loan from 1One Finance. The loans available there are at lower interest rates, perfect for funding emergency expenses.

The post Tips to Avoid Racking up Debt When You are Unemployed first appeared on 1onefinance.