Reassess Your Financial Standing At the Time of a Loss of Income

Written By ipink edy on Sunday, October 27, 2013 | 9:42 AM


As long as we have a job, we always think that we have a steady source of money coming in. We have pre-considered budgets for the electric bills, the internet bills, communication bills, and even for a little leisure. If we're smart enough, we also have set aside a steady percentage for savings. However, when we are faced with a sudden loss of income, what do we do? What do we do when the bills are still coming in but the paychecks have stopped?

Now, don't panic. In fact, the best thing that you can use right now is peace of mind. Use this time of reflection to reassess your financial standing.

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Look at your monthly budget. Add up everything that you pay regularly (a.k.a. bills) and see how much of your income it eats up. If it exceeds 35%, then you are on a bad place. The thing is, your total bills (including mortgage) must not exceed a third of your total income so you will be able to pay it easily in case an emergency arrives. Besides, you've got to have a daily living allowance to think about so you have to make sure that that's covered too.

After that, look into your daily expenses and assess if you're going a little over your budget often. Divide your total disposable income (income minus expenses) by the number of days in a month to see your daily budget. If you go over this and end up sacrificing the more important things (loaning to pay the electric bill, pawning a gadget off to pay for the mortgage) then you must remember to discipline yourself better. Cut back on the unnecessary stuff and focus on your bread and butter. Your loss of income will let you see this more clearly; and when you get back on your feet, hopefully you will have a better sense of financial discipline.

Did you save? Or did your job loss just made you incur a huge unemployment debt? Use the no-salary time as a time to reflect on having savings. A lot of financial experts say that the healthy percentage for savings is 5-10%. For a 500 dollar monthly salary, 25-50 dollars doesn't sound that big. However, if you save 25 dollars a month, that would amount to 300 dollars a year. You could buy a shiny new gadget for yourself during Christmas or you can just let it sleep in the bank, gain interest, and save for a rainy day. Who knows you'd have to finance a car or home repair? Or your family member has a medical emergency? At least you've got bucks to shell out.

It's good to realize all of these things and become a better spender when faced with a sudden loss of income. However, it doesn't take a rocket scientist to also realize that you don't have to suffer a job loss just to realize everything that's written here.

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