10 Financial Tips that can help you survive a Job Loss

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Losing your job is a nightmare. It may seem diffcult to recover from such a bizarre occurrence. In a challenging phase such as this, it’s imperative that you pick yourself up, dust yourself off and start working on a plan that minimises your financial stress. This process will lend some stability to your life and free up mental space to figure out solutions that can work for you.

But today’s job market is as unpredictable as it can be and you never know when you are going to be caught up in the vicious cycles of layoffs, recession and other factors that can result in job loss.

Here’s how you can prepare to deal with a job loss and financially tide over any such crisis in the future.

1. Start Saving Now

When it comes to individual finance, this could be considered the most powerful words. It doesn’t matter whether you think you have plenty of time ahead, you have just started earning, you will start once you get a better job among others. Let’s look at it from an absolute left brain angle. A rupee you save and invest in your twenties today will have almost five times (or more) the value, assuming a seven percent yield throughout all periods.

2. Review your Budget

It is crucial that you have your expenses under control during these times. Design a strict budget and categorise all expenses either as necessities or nice-to-haves. While expenses such as groceries, rent, utilities, etc., will be a priority; you may want to re-evaluate the need for having multiple streaming services or buying new technological gadgets for now.

While reviewing your budget, have an honest chat with the family. Make them your allies in managing expenses. This process would help you cut down on non-discretionary expenditure. Further this way, you can better allocate your resources to maintain liquidity and improve savings.

3. Use your Emergency Savings

Building a contingency fund is pertinent to a sound financial plan. If you have been diligently putting money aside into your emergency savings, this is the time to utilise it.

About 10-15% of your corpus can be in the form of cash-in-bank, while the rest can be tucked away or converted to a liquid fund. This planning will further help in generating some returns and can be accessed easily when required. Avoid investing in equity for short-term gains, as the risk involved is high. An ideal emergency fund should cover you for 6-12 months of expenses.

4. Think through Finance Rules

As said before, these things are not set in stone and when living under the same roof (be it family or friends or just flat mates), there must be a basic understanding about the common expenses. It is better to clear every due bill in the first week of getting your salary, after which you can plan for monthly expenses and savings.

5. Start with a Meeting

Gather the household together for a discussion, especially if you are the only or one of the earners. Talk about the situation and your investments planned for the blue period and how they are intended to be utilized. No matter how or what the agreement is going to be, it must start with a complete discussion of requirements, predilections, monetary terms, and most of all, ways to make whatever you have decided on bump-free and positive. Tough times breed resentment. Hence it is important that you keep the communication flowing.

6. Refrain from dipping into your Investments

Even though times may be challenging, you should avoid dipping into your investments unless the situation is dire. Remember, it takes a long time to build savings and barely any to deplete it all. Liquidating investments can have a significant impact on your long-term goals such as saving for your children’s education or your retirement planning.

If possible, see if you can tide through with your spouse or any other family member taking on the financial reins for the time being. Alternatively, if you are due to receive a severance package, a small portion could be used for managing expenses, while the rest can go towards your emergency fund.

7. Create Timelines

In the real world, monetary arrangements are seldom flexible. Based on these, tax and lawful suggestions you obtain as well as individual inclinations. Whatever the necessities, please ensure you have an effective agenda for you and the other close family (or whoever you are living with) that set financial and behavioral rules you expect met. To settle any outstanding dues, the first thing to do is make a time frame for it and resolve to do it in that particular period.

8. Be prepared to keep a track of Expenditures

Post meeting and collective agreement, retrofit your domestic budget to keep track of high end consumption, utility expenses, groceries, fuel and such like for expense sharing and perhaps tax purposes. At the end of the day, having your loved ones with you can with any luck have numerous rewards that go beyond simple buck-calculations.

9. Dealing with Equity MF SIP’s

Should one stop SIP’s? The answer to this may not be applicable in all the situations. Money moves out of one’s income through SIP into a specific MF scheme. So, one may argue saying, when there’s no income, even SIP’s should be stopped.

While this looks fine, but, if one has enough available funds to not just meet household needs for the next 3-6 months but also keep the SIP’s running, the SIP’s may very well continue. For a double income family, it could work as well.

Further, depending on one’s financial situation, one may have to either reduce the size of SIP’s or delay the stoppage, if the cash crunh is not so severe and a new job prospect is high in quick-time.

10. Read carefully before Borrowing

Remember that any new loan you take could have high-interest rates, eating into your savings and adding to the repayment stress. Prioritise critical existing loans such as a mortgage or car loan. Subsequently, consider paying off other high-interest debt or alternatively refinance them under a single loan.

In addition, use credit cards sparingly. Utilise the interest-free credit window and ensure that you settle the amount due in full and on time. Unpaid credit card dues can snowball quickly and further deplete your credit scores. They are often between 36-45% rates of interest.