Amid inflation, it can be a very difficult situation for people who have lost their job to take care of their financial matters. However, proper planning and strict financial discipline can help you effectively manage your finance till you get a new job.
Here are some critical points that can help you manage personal finance if you have lost your job.
Spend Only on Essentials
Often after losing their jobs people continue to spend normally and soon, they exhaust their accumulated funds, inviting financial distress. Job loss is not a normal situation, so you need to take some tough decisions and reducing your expenses is one of them.
Make a list of all your expenses and segregate them from top to bottom based on their priorities. For example, necessary expenses should be listed on the top and the least important expenses should be placed lower. Expenses like rent, electricity bills, food and vegetable payments, school fees, etc. can be placed on the top of your expense list. Now, you need to reduce the expenses. So, start from the bottom of your list and try to shorten it as much as possible. You can easily reduce the spending on items such as OTT subscriptions, club membership, restaurant expenses, holiday travel, etc.
Also Read: How much should you save and invest before you reach 30?
Adjust Your Budget
By cutting your expenses, you have already won half the battle, now adjusting your budget will make it easier for you to meet the same using the available liquidity. In the absence of a monthly salary, you have to depend on the contingency fund. Usually, an ideal contingency fund can help you meet your spending for 8 to 10 months. So, you have to meet your necessary expenses along with debt repayment and critical investments, including insurance payments, etc. using your contingency fund. So, immediately adjust your regular budget by shifting your focus to essential payments and by avoiding the payments towards things which you can afford to be delayed.
For example, till you get a job you can suspend some of your SIP investments, stop the bank RDs, avoid travelling in the personal car to save fuel expenses and focus on maintaining an adequate level of liquidity in sync with your new budget requirements.
Talk To Lenders for Moratorium Period
When you don’t have a job, it can be a huge task to repay the existing debts. The problem can get more and more severe as time passes without a job. If you fail to repay the loan EMIs or the credit card bill, it can impact your credit score negatively and your financial health may deteriorate gradually. The day you get the information about your job loss, you should immediately plan how would you ensure timely repayment of your debt. If you feel that it would be difficult for you to repay the debt and manage the other financial obligation at the same time, you may talk to your lender and explore options like getting a moratorium period or extension in the repayment period to reduce the EMI size.
Also Read: TAX PLANNING: Four financial tasks to complete before April 1
Financial Plan for Longer Period
You should be ready with an alternative plan to arrange extra financial support assuming a delay in getting a new job. Stay in touch with your close friends and relatives who can support you financially in a difficult situation. You can stay ready with loan options such as OD against FD or LIC
Temporary Earning Options
Remember, job loss is a temporary phase in your life and soon it will pass away. You must not lose your mental health and keep on trying to get a new job as soon as possible. Simultaneously, explore temporary income options like getting a part-time job or freelancing based on your skills. Even a small income can help you in a big way when you are jobless.
Adhil Shetty, CEO, Bankbazaar.com, says, “After your job loss, make sure you’ve collected your severance package and all dues. Your severance may be worth at least a month’s pay. You can use this money judiciously during the layoff as you begin finding a job. Unless you really need it, resist the urge to liquidate your PF holdings—it’s a long-term investment meant to provide you a fixed income in retirement.”
With financial discipline and a well-planned approach, you can easily come out of the difficult situation and reclaim your normal financial health.