Dubai: So you lost your job? Sorry to hear that. In order to avoid going broke, follow these neccessary steps.
1. Talk to your bank
If you have any outstanding debt, your account is likely to be blocked. When changing jobs, your last salary will be marked as a final payment or end-of-service benefit by the employer. “Be prepared,” says Jon Richards, CEO of Compareit4me.com.
“The last thing you want is to be caught out with no access to funds, and/or direct debits and standing orders being rejected or declined. Meet with your bank well ahead of time to ensure they explain the process of obtaining a salary certificate and letter from your new firm, in order to avoid accounts being frozen.”
Ambareen Musa, CEO at Souqalmal.com, advises checking with your bank on their policies with regards to change in employment beforehand; this will help you avoid any surprises. Waleed Barhaji, Business Head of Consumer Finance at Noor Bank, says it’s always best to talk to the bank. “Banks can provide realistic solutions to reduce your financial burden.”
2. Take stock
“When you find yourself in a situation with no monthly income, it is a better time than ever to ensure you budget wisely,” explains Richards. “Make a spreadsheet of expenses or download one of the handy money apps to your phone. This allows you to keep a 24/7 eye on your spending and outgoings.”
3. Avoid taking on more debt
It can be tempting to borrow cash in your hour of need, however, you could spiral into debt much faster and deeper if you take on credit while without a job.
“The obvious place to turn for many here would be credit cards, but if you are unable to pay the credit cards off in full each month, they can become a sure-fire way of getting further into debt,” says Richards.
Musa agrees that many people turn to their credit cards as a last resort. “This will only worsen your situation as credit-card debt comes at a very high interest cost. It is definitely not a good idea to take credit to keep the lifestyle you used to have when employed.”
4. Prioritise your bills
It’s never wise to let bills go unpaid, but if you’re in a money crunch, make sure you know which ones to pay first. “It is important to note that the Al Etihad Credit Bureau now produces individual credit reports and is able to mark your account if you incur missed bills and payments, which can affect your ability to take on credit or a loan in the future,” says Richards. “It would be unwise to miss a credit-card payment or rental cheque, so prioritise spends like these.”
Musa advises looking at repayment strategies such as debt stacking (when you pay back the most expensive loan first) to lose debt quicker. “Figure out which strategy works for you best, keeping in mind the money you have available.”
5. Repayment plans
Check if your bank offers temporary and long-term lower monthly repayment plans. “Many banks or organisations offer solutions to debt problems,” says Richards. “Don’t ignore the fact that you may be in some financial difficulty; contact the provider to see how they can help.”
Musa advises checking if your loan terms can be modified if you’re facing difficulties making regular repayments. “You will find that many banks are happy to accommodate if you have had a good credit history with them.”
6. Find a new job but avoid quick fixes
If you have no idea how you’ll make your next rent or mortgage payment, then most likely you will need to get a job straight away. But don’t grab anything that is available as a quick-fix solution today. “If you aren’t happy with the job you are taking, ensure that you are not tied into a lengthy contract that may be difficult to get out of,” says Richards.
Musa advises considering temporary employment or freelance work to help keep you afloat in a time of financial crisis. “It is important that you do not take the first job that comes along to again leave soon after as this will put you back into the situation you are in currently. Better take something temporary but which allows you to pay the bills and look for the right job,” she says. Bear in mind the UAE’s employment laws regarding sponsorship, visas and bans.
7. Update the bank
Meet the bank, visit the branch and update your new employment and salary details. Once you provide the bank with evidence of your new employment and salary, the account can be released immediately.
“With banks having the last word on how your account is treated in such a case, this makes it extremely crucial to keep them in the loop,” says Musa.
“Make sure you ask the bank representatives about the exact procedure, point of contact and documents required to unfreeze your account, so you’re not running around later.”
8. Always keep a bit of cash aside
Whether you are deep in debt or not, saving for a rainy day guarantees greater peace of mind. “Monthly or fixed-term savings tools can offer a timely back-up when you are faced with unforeseen financial hurdles such as job loss,” says Barhaji. “It really is a good idea to put aside some spare dirhams every month in a savings account to use for when you really need them,” says Richards.
9. Job loss insurance
Musa says that job loss cover isn’t always offered to borrowers and for every type of loan. “To be eligible for claiming your benefits, your loss has to be ‘involuntarily’,” she says. “You will be asked to show a letter of termination along with additional documents. To avoid surprises, make sure you read all the terms and conditions so that you’re aware of any other exclusions.”
Plan for unforeseen circumstances such as job loss right from the time you apply for a personal loan or credit card, advises Barhaji. “While there is premium attached to such coverage, having an alternative to manage your debt payments will make a huge difference when faced with a job loss.”