India’s unemployment statistics are climbing while large companies are also reducing headcounts by the thousands. Losing one’s job is an unpleasant experience, and it may also take away one’s financial securities. However, you can take some smart steps to ensure that your layoff isn’t financially taxing.
Here are some ideas to get you through.
Before The Layoff
Create An Emergency Fund: An emergency fund should be ideally worth six to twelve months of your current monthly income. It should be saved in a liquid, low-risk instrument such as a bank deposit or a Liquid Mutual Fund. This fund should be kept for the sole purpose of helping you get through a difficult period such as a job loss. It should also be large to cover your fixed expenses such rent or Home Loan EMIs, utilities, groceries, supplies, school fees, etc.
Get Insured Immediately: When you lose your job, you may also lose your employer-provided Health Insurance. In case of a sudden hospitalisation, you may have to pay a heavy cost. To avoid such a situation, immediately buy Health Insurance for all members of your family.
After The Layoff
Take Stock Of Money: Firstly, collect all your dues from your employer. There’s typically a severance pay worth at least a month’s pay offered to impacted employees. Next, take stock of your existing savings, funds and investments. This money should be enough to help you get through your immediate future. You must use these funds wisely, in a controlled manner.
Liquidate Investments, Carefully: Do not rush to liquidate all your investments. Rather, do this in a controlled, need-based manner. For example, instead of liquidating your entire Mutual Fund folio, you may want to redeem only what you need for the immediate future. Do not file a PF withdrawal right away. You must hold on to this money for your future needs.
Restructure Loans, If Needed: If your situation impacts your ability to pay your EMIs or Credit Card dues, you may want to intimate your lender at the earliest. In some loans, you are contractually bound to inform the lender about any changes in your employment status. If you are unable to pay EMIs, you should work with your lender to restructure your debt. For example, you may increase the loan tenure to reduce the size of the EMI.
Use Insurance Grace Period: If you’re unable to pay an upcoming insurance premium, you can contact your insurer to understand your policy’s grace period, which is typically 30 days for Life Insurance and 15 days for Health Insurance.
Sell Assets: To raise liquidity for your immediate needs, you may consider selling assets. For example, you may have a car whose EMI is burdening you. Therefore you may sell it and settle your car loan.
Use Credit, But Carefully: You must use your credit card cautiously during your layoff since you are not generating regular income to pay off your card dues. If you absolutely must, borrow from friends or relatives while asking for easy repayment terms.
Finally, you must put yourself on the job market at the earliest. While you search for a job, you may also support yourself with part-time or freelance assignments. You don’t need to lose your sleep over losing your job. With some smart planning, you can get out of your quagmire quickly.
(The writer is CEO, BankBazaar.com)