Karen Blumenthal at The Wall Street Journal recently wrote a piece describing the need for a financial game plan the minute someone is laid off. Forming a game plan, no matter how simple, is one of the most important actions that can be taken in the wake of a job loss. Her five steps are:
1. Find a way to continue with medical coverage after the layoff.
2. Calculate your minimum monthly expenses.
3. Know your cash on hand and exactly how much is coming in month-to-month going forward.
4. Look for supplemental income opportunities.
5. Manage your 401(k).
While her advice is targeted at a general audience, she does provide insight to what someone with debt should do if they lose their job. One great idea is to form a financial plan that includes a plan for eliminating debt, since outstanding debt can hamper and complicate financial decisions. Another valuable thought is to look for additional ways to supplement your income – and then add that income towards debt reduction payments. Blumenthal suggests that someone working suspend contributions to a 401(k). With debt, this is the best advice – instead of socking away any additional money into a 401(k) or other investment or retirement account, add it as soon as possible to debt reduction payments. Finally, she recommends talking with kids about the family finances and not shying away from pulling unnecessary activities and trips. This is excellent advice, as honest communication with the kids can help to make clear family priorities in a tough economic environment, including efforts to eliminate debt. Much of the enjoyment in children’s lives can be fulfilled by substituting expensive activities with fun experiences with little or no cost.
Raj Patel writes for DebtGoal.com, a do-it-yourself system for getting out of debt and lowering your interest costs. DebtGoal.com incorporates all of the techniques discussed in this post and can help users understand and get visibility to and manage their debt finances.
Tags: cash management, debt, debt and investing, debt and medical coverage, debt and retirement accounts, debt elimination, Debt Management, debt organization, debt plan, debt reduction, family and debt, supplemental income
