“If this past year has taught us anything, it’s that nothing can be taken for granted anymore.” – MoneyTimes, October 7th, 2009.
For bankers and developers, politicians and ordinary citizens, 2009 has been a year of great financial uncertainty, change and disappointment as jobs and careers have disappeared and ‘lifestyles’ have suddenly become unaffordable as credit has dried up.
Not everyone has experienced the change the same way of course. A few have managed on savings and a spouse’s income until a new job has come along. Many have packed up and emigrated.
A few have even found unemployment a liberating experience, no longer having to chase an increasing elusive ‘lifestyle’ doing a job they never enjoyed anyway.
Many others have had a much harder time of it for no other reason often than that their outstanding debts are out of their control and out of their realm of repayment and they simply don’t know where to turn or what to do.
Since this column is about personal finance, let’s focus on some of those actions that you may not have considered or would never have contemplated.
Some apply to people who’ve lost their job; others for people still working but with reduced income, debts or negative equity:
1: Use redundancy settlements to create a credible repayment schedule to present to your bank and other creditors.
Instead of using your redundancy lump sum to pay off a single debt, like a pressing credit card bill, HP payment or even mortgage arrears, use it as part of a larger process that includes cutting your everyday spending to the bone.
Then add your redundancy money to the new schedule of repayments that takes account your reduced income, your essential purchases (like food, heat, light, educating your children) and the need to pay something off every one of your debts.
Ideally, all your loans should be switched to interest only payments (or less) over longer payment terms. Eddie Hobbs’ excellent book, ‘Debt Busters’, gives a number of worked examples.
2: Rescheduling debt only works if you’ve also slashed your spending, but even people who are still working and in debt should do this.
A stubborn credit card bill or car loan will be paid off much faster if the money spent on a monthly TV cable contract, gym membership or on alcohol, cigarettes and takeaways is scrupulously directed at your debt. Set a one year goal – and see how fast is passes.
3: Get a part-time job, no matter how low-paying. Every euro you pay against your debt gets you closer to financial solvency.
Get help from your local job-centre and citizen’s information centre; sign up with employment agencies; do some personal advertising around your neighbourhood and town. E-mail every contact you have with a heart-felt/charming/funny note asking for their help in securing you part-time work – nights, weekends and holidays.
4: Teenaged and older children should be required to turn over a substantial part of their earnings if a parent is now unemployed.
Encourage part-time jobs and if you have a particularly beautiful baby or toddler, consider signing them up at modelling and talent agencies.
My son once did a one-line voice-over for a radio ad (he was at the station by chance) and was sent a €300 cheque a few weeks later by the ad agency.
5: If the bank won’t lend you money to refinance expensive debt at lower interest rates (this is especially important if you have expensive credit card debt), try your local credit union.
If they won’t help, approach sympathetic family members. Offer them collateral – your car, jewellery, electronic goods, etc.
With even the top fixed interest rates only offering c3.5 per cent gross, they may be happy to accept a five per cent rate (but not expect the repayment on a compounding basis.)
6: Sell stuff. If you are confident your unemployment will be short-lived, simplify your life and start selling unwanted or unneeded personal items – from electrical goods, furniture, CDs, DVDs, books, jewellery, clothes, shoes.
You CAN earn money from e-Bay. If you get good at it, offer to sell stuff for other people for a small fee. If needs be, sell your car (keep the bike), the boat, jewellery, antiques. Sell investment policies or shares, your car, even your house (if you can).
7: Too many people in serious debt hang onto their house for too long, losing out on what equity there might be in it to arrears and legal charges. Hard as it might be to admit it, IT IS ONLY A HOUSE!
Rents are falling and there is a huge selection of good rental properties available. A home is where your family (and your stuff) is; it isn’t the bricks and mortar.
8: Last, but by no means least, stay away from moneylenders. Swallow your pride. Go to MABS, to your local social welfare officer, to family or friends. Seek assistance from St Vincent de Paul, your church or other charities.
Jill Kerby welcomes reader’s letters. Please write to her via The Munster Express, 37, The Quay, Waterford or via email at firstname.lastname@example.org
For all your banking and insurance needs, check out Postbank at your local post office or LoCall 1890-30-30-40