Thursday, December 4, 2008

Unemployment and Mitigating Debt

I discussed investing in yourself during unemployment in my last post, and I believe the best way to invest in yourself is developing streams of income that will deliver without your direct attention, even after you find employment. However, even the employed folks out there can take advantage of the following proposal.

Another reason for developing this avenue is mitigating debt. During a prolonged period of unemployment or underemployment, you will accumulate debt. I am speaking from experience about unemployment. Debt will really start accumulating when the unemployment insurance payments stop. Yes, you may ween yourself down to the bare essentials. However, you still have obligations like the mortgage, your family, the car payment, and the utilities that must be maintained. Therefore, accumulating debt is most likely unavoidable. Developing a stream of income may not totally replace your lost income, but any income will mitigate your debt, i.e. you borrow less to pay for your essentials. When you do acquire employment, use the income stream to help pay off your debt.

Dave Ramsey has a great plan in his book, The Total Money Makeover. The plan includes a method called the Debt Snowball where you devote all available income to pay off debts in an ispiring way. Your alternative stream of income can help you build the snowball.

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