Coronavirus crisis: How to get your finances in order in case of job loss

By: |
March 24, 2020 12:48 PM

The worst part of the whole scenario is that no one knows how long the pandemic would last. In times like this to manage your finances, the first thing to do is to maintain your emergency fund. Then make sure to pay your non-discretionary expenses, such as EMIs on loans for essential, premiums for life and health insurance, and funding your long-term goals.

coronavirus, how to manage your finances, job loss, emergency money, financial planning, COVID-19, coronavirus health insurance, coronavirus insurance, insurance, FD, account holders, borrowers, NEFT ,RTGS ,IMPS ,UPILast week Indigo Airlines announced a salary cut for its employees ranging from 5 to 25 per cent.

As a result of the coronavirus impact, if it continues for some more time, pay-cuts and job lay-offs may not be a surprise. The coronavirus (COVID-19) pandemic has put a halt on various business operations. Even though no sector is immune to layoffs especially with a slowdown in the economy, however, there are certain sectors/businesses that are bound to be hit badly. With restrictions and lockdowns imposed across sectors globally till the end of the month at least, people in the travel and tourism sector, hotels and airlines are the ones most in danger. Last week Indigo Airlines announced a salary cut for its employees ranging from 5 to 25 per cent.

The worst part of the whole scenario is that no one knows how long the pandemic would last. It was estimated by the United Nations on March 18th that globally over 24 crore people could lose their jobs due to the coronavirus pandemic.

In times like this to manage your finances, the first thing to do is to maintain your emergency fund. Then make sure to pay your non-discretionary expenses, such as EMIs on loans for essential, premiums for life and health insurance, and funding your long-term goals.

Keep maintaining your emergency fund
This corpus needs to be ready so that you can dip into this in case of an emergency like a job loss. The main reason behind having an emergency fund is to cover your fixed costs for a certain period of time. Note that, your emergency fund should at least last you for the 6 months, however, this depends on the industry you are in, and whether you are a single bread-earner or part of a double income family.

An emergency fund can be created by investing in a systematic investment plan (SIP) for 6 to 12 months. It should be invested in funds keeping in mind the liquidity of such investments so that it can be dissolved as and when the need arises.

Can Credit cards come to your rescue?
Credit cards can be used in case of such emergencies, as they provide the cardholder free credit for over a month/45 days. Having said that, it should be kept as the last resort, even though credit cards can be used for cash flow management. The use of credit cards will only be possible,

However, that is only possible if your cards are free from any existing debt. If you have existing dues on your credit card, you need to clear that up first. Experts say, to deal carefully when handling credit cards in situations such as job layoffs. Make sure not to roll over any debt, as it works out to be very expensive. Also, clear all dues by the due date, and avoid the trap of partial payment.

Keep your insurances going
At no cost can you stop paying the premium for your insurance. Even in such a case of a job loss, you have to try to keep your insurance policies active by paying the premium on time. If you have been relying only on your health insurance policy provided by your employer, know that in the case of a layoff both you and your family will be without any insurance cover. According to experts, one should have the basic mix of health cover, adequate life insurance, and a super top-up policy.

How to deal with your investments?
Firstly, do not touch your investments that are targeted towards long-term goals, which include retirement-oriented funds and the Employee’s Provident Fund. These are long term funds that need to be kept untouched and not be included in the process of funding your expenses in a temporary situation.

Next, in case of dire need, you can use your short term investments or investments in liquid funds, during this time, which can act as a cushion if needed, along with your emergency fund. Also, try to reduce your expenses, in such times or at least postpone it. Additionally, in such a scenario, do not commit to large loans, such as housing loans.

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