Having a job as a source of income is essential. But for many people, they might have other alternatives: a spouse with an excellent income; parents who provide support, or an income from investments or inheritance. Do they really need to work for money? The answer may be “no,” especially if they have a busy life, childcare needs or anything else.
Putting the value of working aside, it is important not to underestimate the financial benefits of having your own steady income from a job — even if it is not very significant. The reason is many people who make this decision of not working, consider the loss of income, but they don’t consider the increase in many other costs because of their unemployment. They also underestimate the security of having a job over the years.
Here are some situations that you must consider before you voluntarily jump into unemployment.
• Health insurance
This is a big one. If you give up your employer’s health insurance, and your spouse’s insurance doesn’t provide a similar coverage — or comes at a higher cost — this is an additional cost that you will need to consider from the get-go.
Health insurance also changes. For example, consider how things will work out if your spouse’s employer stops coverage for dependents, and you have to shop privately for plans. What if your spouse loses his or her job? As unlikely as this might sound, relying on one job and one source of benefit is risky. Taking a look at this cost — and this risk — before your make the decision should be part of your due diligence.
• Rates on loans
Lenders are leery of unemployed borrowers. They like to see the security of payroll coming in every month. Although this doesn’t mean you won’t be able to get a loan, it means that you might get a much higher rate and more stringent terms than someone who is employed — even if you have income. You might be able to get around this by having a spouse or a family member as a co-signer.
Some loans also might be trickier than others. If you’re trying to get a loan without employment, be sure to ask around and show a good proof of your income — from investment or inheritance. But you might end up having to put some deposit as a guarantee for your loan.
• Credit cards
Similar to loans, lenders are happy to hand these to clients who have regular employment. If your income is not coming from payroll, you better try to check where you bank for investments and savings, if you have any.
Otherwise, your best bet is to get an additional card on a spouse or family member’s approved account. Doing so, however, will link your spending to this person, who becomes responsible for your spending. So if you appreciate your financial independence, this might not be the best solution for you, even if that other person doesn’t mind.
• Choices gone wrong
Many people have to stay home to take care of children or the elderly, but others simply opt for unemployment for the comfort and convenience. If your decision falls into the latter category, think again.
Life arrangements don’t always work out as hoped in the long run, even if you don’t want to think so. Your perfect marriage might fall apart; your investments might be hit by a market meltdown, or your inheritance might not help you as long as you wish.
For all of these reasons, try to have some paying gig on the side — if your circumstances allow. This will give you the security and financial independence that you need now, and protect you in the future. In addition, it is something you can show to lenders when you’re seeking any type of loan or credit. You don’t have to work full-time or outside the house, but pick something — based on your interest, skills, or hobbies, that can produce a regular income.
Choosing to be unemployed
Think of health care coverage
Consider difficulties with loans and credit cards
Don’t overlook the lack of financial independence
Thinks of how you’d survive if your situation changes
