Corona Crisis: How to manage your finances to survive amid salary cut, job loss?

By: |
July 7, 2020 2:25 PM

Not only the workers employed in the unorganised sector, but employees of the organised sector are also facing hardship due to salary cuts and job losses.

COVID-19 pandemic, salary cut, job loss, cost of living, SIP, EMI, EMI moratorium, Provident Fund, PF withdrawal, gold loan, PPF, NPS, loan against insurance policy, loan against securities, mutual fund, MFAmid the hardship that you may have been facing, how should you manage your finances?

With no jobs and no earnings during the nationwide lockdown that was imposed to contain the spread of Novel Coronavirus COVID-19, workers engaged in the unorganised sector grabbed the first opportunity to go back to their native places not only to meet their family members, but also to minimise the cost of living by saving on house/room rent and relatively expensive food items.

Not only the workers employed in the unorganised sector, but employees of the organised sector are also facing hardship due to salary cuts and job losses.

According to a FICCI – Dhruva Advisors Industry Survey of June 2020, nearly 32 per cent of the firms have reported that they see a job loss of over 10 per cent from their company’s perspective. In the April edition of the survey, this figure was close to 40 per cent.

The survey also revealed that 34 per cent of the firms participated in the survey have witnessed salary cuts of more than 10 per cent, while employees of 14 per cent firms have faced salary cuts between 5 per cent to 10 per cent and employees of 4 per cent firms have seen up to 5 per cent salary cut.

Amid the hardship that you may have been facing, how should you manage your finances?

There are many ways to survive a crisis. The following are some of such ways –

Minimise cost of living

In case you have lost your job or are working from home with a salary cut, the best way to sail through the crisis time is to cut all the luxury expenditures and live on bare minimum.

With almost all the entertainment industries closed due to COVID-19 pandemic, it’s relatively easy to cut expenditures on luxury, but the need is to concentrate on minimising the expenditures on necessity.

If you are staying on high rent and have lost your job, you may go back to your hometown and start applying for jobs online from there. For time being, you may even try some alternative jobs for survival. You may also work from your hometown, in case you are facing a salary cut while working remotely.

By this way, you will not only save the rent, but would have to spend much less on other living expenses in comparison to bigger cities.

Postpone investments, EMIs

In case of salary cut or no salary due to job loss, you may stop your SIPs or other regular investments till your earnings stabilise.

You may also avail EMI moratorium if earnings totally stop. However, you have to keep in mind that interest will continue to accumulate during the moratorium period. So, it’s better to continue paying EMIs of high-interest loans.

Utilise savings

In case of job loss, you may have to liquidate your savings for day-to-day expenditures. In case you have to do so, utilise your emergency fund first, but partially and then liquidate your short-term liquid funds and try not to disturb the investments made for long-term goals.

As gold prices are currently high, you may liquidate your investments in gold, rather than redeeming equities, most of which are not performing well.

You may avail the opportunity given to partially withdraw your Provident Fund (PF) money or make partial withdrawal from your PPF, NPS account, but only in extreme situations.

Take loan

In case you have exhausted most of the other options, you may have to take loans for survival. In such a situation, avoid taking high-interest personal loans or credit card loans, but try to take cheaper loans like loan against insurance policy or other securities like mutual funds (MF) or gold loan.

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