Job loss has become a concern for many salaried individuals — both young and mid-age professionals. The recent job cuts by global giants are some of primary signals of the worsening job market worldwide. Uncertain economic situations do lead to job losses, a fact which can’t be denied. It is already happening and in such a situation, it is important to be financially ready for any financially uncertainty.

The only answer to this is preparation in advance to sustain financially while you are jobless. It is always wise to dig the well before you feel thirsty. In fact, the old saying – Precaution is better than cure – suitably explains that you need to be financially prepared in the event of a job loss.

Here are the 5 ways to be financially ready for a job loss.

Avoidable expenses

It’s a no brainer. Just do some basics by looking at your expenses and expenditure behaviour. Waste no time in figuring out expenses which add no values and can be easily done away with. It’s the need of the hour. You may have no choice as difficult times demand tough measures. Such an exercise would help you save a bit more bucks. And the cumulative effect of such savings may turn into a sizable corpus. It’s worth reminding that every penny saved is a penny earned.

Adhil Shetty, CEO, Bankbazaar.com, says, “The first step is to assess your financial situation. This includes understanding your income, expenses, and assets. Once you have a good understanding of your financial situation, you can start to make a plan for how to manage your money.”

Also Read: Retirement Planning: 5 effective ways to assist your retiring parents with their investments

Emergency Fund

As a top priority, focus on building an emergency corpus, if you have none or have inadequate sums. The amount should be at least adequate enough to take care of your 12-month expenses. If your current monthly expenditure is, say, Rs 40,000; it is recommendable to have about Rs 5 lakh as emergency fund to sustain the jobless period. You can park this money in your savings account for usage.

Shetty says, “If you have an emergency fund, now is the time to use it. Your emergency fund should cover your living expenses for at least 3-6 months. This will give you time to find a new job without having to worry about how you are going to pay your bills.”

Focus on Conserving Your Investments

Take a quick look at your current investments. If need be, review it with your financial advisor or some expert. Growth in monetary value is one of the primary reasons behind investing. However, at times we also need to conserve the wealth created thus far. In the event of a job cut, it is advisable to get out of the high-risk products like stocks or equity-oriented investments such as equity mutual funds.

Divert such investments, if not fully, at least partially, to debt assets like debt mutual funds, bank fixed deposits which of late are fetching reasonably good interest rates. You may also choose debt-oriented hybrid funds. Though growth may not be as high as your equity investments offered thus far, you will get a sense of financial security with readily available liquidity in hand. This can be utilised if there is a prolonged period of job loss.

Increase Your Insurance Cover

Unexpected medical bills can potentially create a big hole in your pocket. Having an adequate insurance cover is the need of the hour. Consider not stopping the insurance premium, sustain it, in particular, the medical cover. Discontinuation may prove hazardous; in case you have a medical emergency while you have no jobs. Your savings and investments may see a big dent due to any health issue if you and your family are not suitably covered. If possible, increase your cover if you can afford the extra cost. A minimum medical cover of Rs 10 lakh is highly recommendable.

Avoid adding new financial liability

Keep your financial liabilities under check. Financial liabilities like honouring an existing loan through monthly EMIs tend to add stress to our financial health. It increases manifolds when there is no monthly steady salary. You may take effective measures to settle or partially settle the loan amount by regular prepayment if it is a short-term borrowing. This would ensure the monthly amount you are liable to pay reduces and you don’t feel much of the pinch while honouring the loan while you lack regular monthly income. Having said that, one also needs to refrain from adding fresh liability by going for yet another borrowing. More commitments of repayment may prove disastrous during tough times.

The phase of being without a job is one of the most difficult times one can ever have. A combination of psychological and financial stress often creates a mayhem. A proper preparation through financial planning offers a workable solution. But far more important than this is you need to be mentally prepared for the worst. With a strict vigilance on expenditure and astute financial discipline with a strong belief that good times would follow, one needs to focus on sustainability. A combination of above-mentioned ways may help you sail your life smoothly on tough waters.