Thinking Money | Free Financial Advice and Tips

Unemployment Is Rising – How Can You Be Prepared?

Posted on 18. Apr, 2009 in General News

You have heard the news – “Retail sales plunged in February, posting the lowest annual growth rate in more than a decade…,” UK.Reuters reports. The same article went on to say that with “unemployment soaring” – it means that many people are going to have to tighten their belts and prepare for continued tough economic times. The good news, though, is that this kind of times can be weathered. Here are some tips how you can get through these tough times and save money.

Reduce Your Debts Quickly

A very important step is to start by getting out of debt as quickly as possible. Paying interest every month is eating away at your ability to save money and use it for more constructive (or survival) purposes.

By using sound debt reduction techniques, you want to get out of debt as quickly as possible – especially credit card debt. This involves paying as much as you can toward your debts each month. The faster they are paid – the less amount of money that you will send to them over the life of the credit.

Avoid Frivolous Spending

Focus your purchases on those things that you need. Avoid waste and buying things that you really do not need. If you are paying down your credit card debt, and other loans, be sure not to put any new charges on your credit cards.

New charges are always the last to be paid in the way that the accounting of the credit card company works. This means that even if you make a payment equal to your last purchase, but you have running balances on your credit cards, that you will still be paying interest on new purchases.

Watch for Opportunities to Get Lower Interest Ratings

Right now, the Bank of England can’t go much lower in the interest rate it charges to the other banks. The other banks, however, the ones that you lend from, may drop their rates from time to time. This could enable you to get lower interest rates and save money on credit cards and loans (and mortgages, too), when this happens.

At this point, however, lenders are being more careful about who they give a loan to, and you will probably need rather good credit and a solid job to get it. Better interest rates, however, can lead to a savings of thousands of pounds – even just on credit card debt over a period of five years.

Establish an Emergency Fund

Even while you are reducing your debt, you want to make sure that you have an emergency fund. This should be a separate account that earns interest, but is not as easily accessible as your regular accounts. You may even want it to be in a separate bank or credit card. A healthy amount would be to have about six months worth of income in it. If you are self-employed, then you will want to have more – up to one year’s worth.

Hopefully, you will never have to use your Emergency Fund – but no one can tell. The main thing here is that you and your family will be prepared if the economy – or your job situation – gets worse.

Tags: Credit Card, credit card debt, Saving money