When Bill D. lost his teaching job, it was an unexpected financial blow for his young family. But rather than re-evaluate his spending and focus on debt management, Bill relied on credit cards to maintain the family lifestyle. It was a choice that resulted in five years of overdue bills and ultimately led him to debt counseling to pay it off.
“It was kind of blind honeymooning,” Bill admits about that period in his life. “It was several years of living beyond my means and I just didn’t think about the consequences.”
Effective debt counseling with a Clearpoint Credit Counseling Solutions, a certified credit counselor, eventually enabled Bill to manage his credit card balances. But he would have benefited by talking with a debt counselor immediately after losing his job. A debt counselor can examine a household budget and make suggestions for adjusting spending and managing debt. Re-evaluating the budget is critical when a wage-earner faces loss of income.
Be Financially Prepared
Even more effective planning can be done before a job loss. In today’s economy, employees should always be planning for a possible layoff. When interviewing, ask potential employers what benefits they offer after separation. Constantly network in your field to increase your chances of quick re-employment. And build an emergency savings fund of at least one month’s salary per $10,000 of income- human resource experts estimate that’s how long it takes to find a job. In other words, a $30,000 employee should save three month’s salary, $7,500. In an economic downturn, it’s wise to save even more as it takes longer than usual to find a new job. A debt counseling session can help structure any budget to maximize savings.
Debt Management After Loss of Income
After a job loss, it’s time to formulate an “emergency” budget plan for effective debt management. Itemize any household income, including savings and unemployment benefits. Then list all household expenses and compare the totals.
Most likely, expenses will outstrip income. This shift indicates an immediate need to focus on debt management–income must be increased or expenses must be lowered in order to meet obligations.
Bill slipped deeper into debt while thinking that help was just around the corner. “Avoid temptation with credit cards!” he warns. “Don’t even start down that path. Before you know it, you’re in trouble and the amounts just seem to grow and grow.”
Fortunately, budgets are flexible. And while you may not see areas for cutting expenses, Clearpoint’s credit counselors are trained to do just that. They can also mediate with credit card companies, putting an end to harassing phone calls. Clearpoint is a nonprofit organization, unbiased and dedicated to helping consumers resolve financial concerns.
It has taken Bill over four years, but effective debt management during that time means he is now making the last few payments on his previously crushing load of credit card debt. He’s relieved to be back in control of his finances. “I can’t say how helpful my debt counselor was,” he says. But Bill realizes that he could have avoided the problem in the first place by restructuring his finances immediately after his job loss.
To schedule a free credit counseling appointment, call 800.750.2227 (CCCS) or get started online now.