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Budgeting It is possible that a position will be secured right away but it can take six months to a year to find a suitable new position. Plan a budget to make the best use of income during the job search phase. The budget plan should include current cash position, expected cash income (severance, vacation pay, unemployment compensation, spouse’s income, interest and dividends), expense forecast (mortgage/rent, food, utilities, debt payments, transportation expenses, insurance, medical expenses, etc.) Some options to consider in the budgeting process are: • Cutting expenses by eliminating luxuries, clipping coupons, cooking at home rather than eating out, walking instead of driving. • Increasing income while searching for a new position by taking advantage of temporary job opportunities. This is also a good way to network and find out about positions that may be open but not advertised. • Decreasing monthly expenses by securing a home-equity loan to pay off high-interest rate debt, if you are a homeowner. The interest rate will be lower, there will be only one payment each month and the interest will be tax-deductible. Once credit card debt is paid-off, do not charge anymore to the account(s). • Consider a debt consolidation loan if a home-equity loan is not a possibility. Securing this type of loan without being employed may be a challenge and since commercial debt consolidation loans cost money the monthly payment may be less but the life of the loan will be extended and may cost more in interest fees. If the hard reality is that there are more bills than can be paid, then choices must be made about prioritizing. 1. Plan to first pay bills that maintain shelter (rent/mortgage), maintain vital services (utilities, phone, transportation, insurance), cost the most to postpone (due to late fees, repossession or disconnect/reconnect charges), or are likely to be vigorously collected. 2. Try not to use the principal of savings accounts. Using the interest from these accounts temporarily is one way to help make ends meet but it is best to try to keep savings intact for emergencies. 3. Selling or pawning possessions can be tempting to earn some quick cash. However, consider this option carefully as it may cost more to replace most items than will be made from them. 4. Filing for bankruptcy should be considered only as a last resort. If there are no other options, consider taking Chapter 13 rather than Chapter 7. Chapter 13 allows for working out a whole or partial repayment plan if half of all your creditors agree. Chapter 7 theoretically wipes a financial slate clean but looks much worse on a financial credit history. 5. Contact creditors before bills come due and have a payment plan ready to discuss. Contact the local Consumer Credit Counseling Service (CCCS) for help in planning a budget. CCCS can help develop a management plan that will renegotiate and/or defer debt to a payment schedule to match income. To find an office near you contact (800) 388-2227 or www.nfcc.org.
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