While many people do not like to talk about the idea of unemployment, being unemployed is a very real concept that can also become very damaging very quickly for anyone who is not adequately prepared. Due to poor planning and the natural process of denial, many people who were unemployed find themselves dealing with a severe financial struggle that they cannot dig their way out of. Credit card companies begin to call looking for money, and you may even find yourself having difficulty getting a job because your credit score is no longer what it used to be. So how can you keep yourself from falling into such a similar situation? The true key to surviving the unemployment slump or an otherwise abrupt interruption in your employment is to develop a plan and setting up an emergency fund that will help to manage your finances. You may also wan to purchase some credit insurance, and to contact your creditors to let them know what is up when you do become unemployed.

The first thing that you should do, regardless of whether you or your family has a credit card or not, is to establish an emergency fund that is designated to cover all of your household expenses for a period of at least six months, but ideally more. At a bare minimum, this emergency fund should be set up to handle your mortgage, your automotive loans, your credit cards, and any other loans like installment loan and student loans for at least six months though longer if possible. By putting together an emergency fund like this, you can make sure that all of your bills are still covered during the period while you are looking for new employment.

When you begin to apply for different credit cards, don’t just look at the available credit, the interest rate and the perks, but also look at the possibility of credit insurance. Many companies are now offering credit insurance which is capable of covering your monthly payments for a pre set period of time while you are disabled or otherwise unemployed. You will still accrue interest during this time, but you will not have to worry about negative marks on your credit report from being late for 30 days, 60 days or 90 days. Without credit insurance, you will get a ding in your credit report every time you are 30 days, 60 days or 90 days late but credit insurance can protect you from this.

In the event that you run out of your emergency fund, or that you do not have one, you should call your credit card companies and discuss your issues with them so that they are at least apprised of what the situation is. This may not necessarily help your credit score but it will definitely give you some peace of mind and get the creditors off your back a bit.

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Originally posted 2009-01-13 05:33:45. Republished by Old Post Promoter

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Financial Security, Money, Personal Finance

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abrupt interruption, bare minimum, credit cards, credit insurance, credit score, creditors, denial, emergency fund, financial struggle, getting a job, household expenses, installment loan, interest rate, Mortgage, period of time, six months, slump, student loans, true key, unemployment