- February 12, 2021
How to Manage Money Post Unemployment?
The recent rise in redundancy due to the ongoing pandemic situation has concerned many UK citizens, especially money issues. Many people rely on their salary as a primary source of household finance.
Also, recently unemployed professionals might find it challenging to find new jobs, mostly due to the protocols, working hours, and conditions. Many professionals such as car mechanics, plumbers, home developers, etc., don’t find much work quickly, even working as freelancers.
Therefore, they depend on benefits, unemployment loans, or other sources for acquiring household income. Unfortunately, keeping up with existing debts, mortgage or rent, food expenses, etc., becomes difficult. However, there are a few solutions for managing money.
Money Management for the Unemployed
● Stick to Affordability
Recent unemployment can prevent a person from relishing the benefits of recurring monthly income. If you fall under this scenario, sticking with affordability would prove beneficial. The first step involves creating a sustainable budget.
So, gather letters, bank statements, records, and books related to lenders. Check your existing credit report with Experian, Equifax, and TransUnion. Add occasional, monthly, and durational expenses.
Subtract the overall expenses from savings and investments. At this point, if you have any passive income from investment or benefits, then add them. It would define the affordable budget requirement for covering monthly costs.
● Prioritize Requirements
Prioritize paying important bills for mortgage or rent, electricity, water, maintenance, etc., before others. Remember that there are dire consequences of delaying or missing payments for such expenses.
At this stage, your savings would significantly diminish. If you don’t have any savings, you should opt for promotional credit cards, loans from friends, bad credit loans, unsecured loans, etc.
Optionally, you can work at a place that pays lower income than your last drawn salary to avoid severe repercussions. Selling or renting unused items online can also help to generate passive income.
● Ask for Help
If you have existing debt and have been recently unemployed, you should inform the lenders. They can assist by freezing charges and interest rates. Additionally, they would provide temporary measures for recovering repayments.
A few creditors can even offer payment holidays to borrowers with a good credit history and continued to make timely repayments. Besides this, you can opt for debt consolidation loans to ease clearing debts.
Optionally, figure out your passion while staying at home and avail yourself a startup loan after creating a business plan. It can uplift your career and ongoing salary if you have experience in the field. Moreover, it is the best help a person can avail during such a time.
The government provides grants and funding to startups with innovative creations. Alternatively, draw money from investments at a specific charge or loss. Furthermore, ask for financial help from friends and family members. Besides this, peer-to-peer lending can prove advantageous.
● Find Money Saving Solutions
Another useful method of increasing monthly income during unemployment is by finding money saving solutions. For example, switching energy suppliers by using price comparison websites. Similarly, reviewing a phone contract to check the best possible deals.
Likewise, check whether you are eligible for government benefits. Additionally, review bank statements, records, lender letters, etc., to check for discrepancies. Also, check the credit rating to avoid any late payment charges, unnecessary deductions, stop repayments, etc.
Furthermore, most households incur large expenses from mortgage or rent. Inform the concerned person of your recent unemployment and notify about late payments. It will help to avoid excess interest or charges.
Besides this, the person might even provide solutions for mortgage or rent. A few banks offer to stop repayments for almost three months. The person can repay for the lost months after the first income.
● Create Savings
The most challenging task during unemployment is creating savings. However, diligent efforts can help to achieve this goal too. The primary step is to diminish existing debts. It is possible by making early repayments.
Short-term loans for unemployment, credit cards, and other money borrowing options can help clear small debts. After clearing these debts, find the adequate time required for clearing new and large debts.
Schedule your repayments through your bank to avoid late payment charges. Ask your spouse to become a guarantor to avail better interest on loans. Also, open a savings account with small denominations with the facility to withdraw with no or minimal charges.
The additional interest generated through the savings account can help to recover remaining debts. After that, any amount deposited into the bank would create interest rates. Moreover, the expenses would diminish and provide more cash for spending and saving.
● Develop New Money Sources
Besides lending space or unused items, there are a few other sources of generating passive income. A few of them include affiliate marketing, blogging, courses, podcasts, website creation, online selling, content writing, etc.
All of these skills don’t require a device and an internet connection. These have helped many home-based entrepreneurs to develop successful online businesses. Keep in mind that rental income can generate £7,500 or higher monthly payment.
Also, Airbnb services can incur much higher monthly income based on the total number of stays. Additionally, leasing out space to a company can secure money from home with almost negligible efforts.
However, there are terms and conditions and taxes accrued for leasing, renting, and Airbnb.
● Claim Insurance
Verify whether you have a Payment Protection Insurance (PPI), Mortgage payment protection insurance (MPPI), or Short-term Income Protection (STIP). Claiming them becomes possible after losing a job or during severe illness.
Most people don’t realize that they have insurance coverage from PPI and forego their claims. Besides this, a lender can inform whether the mortgage, credit card, or rent has any of these coverages.
Unfortunately, most of them either have a minimum work duration period clause after taking the insurance. Also, people that know upcoming redundancy might become ineligible for taking a PPI.
Besides this, PPI can get refused if the person had information about upcoming redundancy before applying. At times, people with insurance can get a refusal for insurance. Under such circumstances, the policy was mis-sold. Therefore you can make a compensation claim.
● Find a New Job
Another easy solution to avoid increasing debt due to unemployment is finding a new job or work. As mentioned earlier, the payout may not match your last compensation; however, it would provide a sustainable income.
Moreover, clearing a debt and managing monthly expenses would become much more manageable. To find work fast, brush up communication skills, showcase work completed during the lockdown, improve social media presence, etc.
Make it easy for recruiters to find your profile by uploading a recent resume and personal details on job websites and portals. Continuously apply for new and relevant jobs available both online and offline. Ask friends and family members to refer to a new job.
Besides this, keep the option of working at a family business and escalating company revenue. It will help to boost your resume and develop new skills.
● Check Council Tax Reduction Eligibility
Citizens that have recently diminished household incomes or availed benefits should check for council tax reduction eligibility. The local council representative can inform the citizen of the deduction after reaching out to them.
Under many circumstances, the local council would provide the option of paying lower taxes for a specific duration. Optionally, they can offer to help by allowing covering expenses for a more extended period.
Alternatively, the local council might offer to reduce the existing tax due to the recent unemployment. Citizens can find the local council contact details on the official UK government website.
● Start Collecting Money
Clearing personal debt is an ideal method of reducing expenses and increasing savings. However, recovering money from people is also vital. Lenders understand this perspective better than others.
Therefore, collect money from tenants, borrowers, friends, and family members. The increased income can help to recover debt repayment faster. Follow government protocols for recovering debt from people if they refuse to make payments.
Notify the credit authorities to recover debt from borrowers and inform the borrower of the repercussion’s impact on their credit rating. Under such circumstances, recovering money becomes easier because borrowers fear the loss of funds from potential lenders.
● Resolve Bank Overdrafts
Banks or financial institutions understand the situation of the borrower, especially during recent unemployment. However, it is essential to keep them in the loop, especially if you have an overdraft.
Many banks offer the option of removing interest on an overdraft, reducing the monthly limit but keep the existing amount, and loan for recovering partial or full overdraft. However, seeking professional advice before taking loan lenders only or overdrafts is crucial. Besides this, switch to renewable energy sources for electricity, air, heating, etc., to lower household expenses. The green sources would also contribute towards environmental protection. Conclusively, these methods would help to manage money post unemployment.