Hearing Rumors Of A Layoff? Prepare Yourself Financially

Finance & Money Articles

Sometimes, businesses have no choice but to lay off some employees. Layoffs can help keep the business afloat financially when sales and/or demand for services aren't enough to keep up with operating costs. Unfortunately, layoffs aren't exactly ideal for employees, because unemployment only replaces a partial amount of income... not all of it.

The possibility of being laid off is enough to put a knot in anyone's stomach. If you've been hearing rumors or seeing warnings of an impending layoff in which you could be affected, here are a few things that can help cushion the blow to your finances.

Open an Additional Checking Account at a Different Bank

It's always good to open a second checking account whenever you are faced with an impending drastic change in your income. The reason for this is because you may lose your regular checking account if you go into a negative balance and are unable to bring it to a positive balance in your bank's required time frame.

For example, perhaps your first unemployment check is late and, therefore, a scheduled debit transaction to pay your Internet bill goes into overdraft. If you are unable to meet the terms and conditions of your bank to make good on this checking account, the bank will close it. But then where would your unemployment direct deposit go if the bank closes your checking account before your first deposit?

Another thing that is important to realize about this is that once your credit report has a note that you owe a bank money due to overdrafting checks, you'll be hard pressed for another bank to approve you for another checking account.

Apply for a Personal Loan

Apply for a personal loan before you get laid off, but don't use the money if you get approved. Consider the money from a personal loan as your new emergency fund, which you can use in case there's a problem with your unemployment deposits or they are lower than you need to cover your bills.

The amount you borrow for this personal loan shouldn't be so high that you'll have difficulties paying it back. Consider this as a cushion and determine how much cushion you need by looking at your specific financial situation. For example, if your vehicle has a lot of miles on it or your kitchen appliances are on their last legs and you don't have enough credit available on a credit card, you may need a thicker cushion.

Ask Your Creditors to Defer Payments & Lower Your Interest Rates

Most creditors are willing to work with customers who are under financial strain, such as during layoffs. Ask your creditors, such as your credit card companies, utility providers, and lenders to defer payments whenever possible, as long as possible. That way, you won't have a stack of bills waiting to all by paid from your first unemployment payment.

Don't expect, however, for them to extend due dates for more than one month from the original due date, since they have to be concerned about their own bottom lines. While you are asking to have your payments deferred to give unemployment benefits time to kick in, ask your creditors if they can lower any interest rates and/or annual financial charges if there are any.

In conclusion, it's important to prepare yourself and your family for the potential changes in your financial situation. Even if you are not part of the layoff, you'll still be financially prepared for emergencies. Therefore, go ahead and open up another checking account at a different bank, such as Union State Bank, to use as a back up plan.

17 June 2016