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While
many people don’t like to talk about it
unemployment is something very real that has the
potential to be very damaging for the ill
prepared. Due to poor planning and denial, many
people once unemployed find themselves in a severe
financial struggle. Credit card companies are
calling them at home, at their old offices, and in
some cases contacting them via mail and e-mail. So
not only are they being stalked by creditors they
are also, more than likely, getting calls of
rejection from potential employers. What a way to
spend a day. So how can you keep yourself from
being in a similar situation? The key to surviving
unemployment or an abrupt interruption in
employment with out major blemishes on your
credit report
is setting up an emergency fund, and developing a
plan which includes purchasing credit insurance,
and contacting your creditors to let them know
about your situation.
The
first thing that all households should do
regardless of whether you have
credit cards
or not, is to establish an emergency fund to cover
your household expenses for up to six months. At a
bare minimum this should include the sum totality
of your mortgage, car loans, credit cards, and
student and other installment loans for six
months. By having this emergency fund available in
an easily accessible form, like a savings account
you can ensure that your bills are still covered
for some time while you are seeking employment.
Also when you begin to apply for credit cards, you
should look beyond the available credit,
interest rate,
and perks to the credit insurance. Many companies
now offer credit insurance that will cover your
monthly payments for a certain period of time
while you are unemployed or temporarily disable.
While you will still be accruing interest charges
on your account during this time, what you are
concerned with and paying for is the protection
that this insurance provides from negative
markings on your credit report from the 30 day, 60
day, and 90 day mark of nonpayment.
In
the event that your emergency funds run out or you
don’t have one, to at least ease the amount of
stress placed on you from multiple calls from your
credit card companies, you should be proactive by
contacting them and informing them of your
situation. While this may not help your
credit score,
it will at least give you peace of mind.
Additionally, the companies may be more willing to
work with you as you try to get things back
together because you have been upfront about your
situation rather than avoiding them by screening
your calls.
At
some point or another you or someone you know may
be faced with unemployment. When unemployment
raises its ugly head, to ensure that you are left
standing, you must have a plan. This plan should
consist of developing an emergency fund that
includes enough money to cover your living
expenses including your mortgage, car, student and
other installment loans, and monthly credit card
payments for at least six months. In addition to
having this money available for a rainy day, you
also need to be more forwarding thinking in your
future actions. For instance, any time you think
about completing an application for a new credit
card, you should consider purchasing credit
insurance as a back up plan in the event that you
are out of work. While you may believe that your
skill set will allow you to obtain a new job
within a week or so of being released, purchase
the insurance any way in case you are wrong and
your emergency fund is not fully funded to last
for six months.
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