Job Loss is a word that most of them who are employed will be able to connect with. The risk of being jobless depends on the individual, the organization he/she works in, the industry in which the organization operates and even the markets (which might turn very volatile). Irrespective how small or big the income of individual is, there will be hundreds of ways to spend it but very less means to earn an additional source of income. Thus in order to manage job loss phase it is good to keep aside some portion of the income towards emergency funding for situations like job loss and career break due to health issues and etc.
Job loss can be either with prior notification and 3 months’ salary or could be just a notification sent 30-45 days before termination. The chance of job loss is high as you turn senior in the organization or when your process turns obsolete. All salary earning members will definitely have certain financial commitments from their monthly salary. Meeting all these without a job in hand is not an easy task at all.
The employment market plays a great role in every salary earning person’s life and there are situations where the employment market is favoring you but not the organization you work for. If you are in the latter scenario, then you are still in a safe zone as there are chances of getting a job in other organizations within next 45-60 days. This silver lining will make a lot of difference when it comes to joblessness. Being jobless not just means not able to earn regular income but also there are other losses such as no health insurance coverage, no savings towards pension or provident fund and no additional benefits from taxation perspective.
How to Be Prepared for a Job-loss
Here are tips to prepare yourselves well in advance for adverse situations such as job loss:
- Review Your Budget Time and Again:
The saying- “Precaution is better than cure”, is a best approach when it comes to financial matters. Be prepared, plan and take precautions about your financial life. Financial fluctuations could be at times due to job loss, accidents, health issues and so on. Have a monthly budget; review it every now and then to check what amount of your income is set aside for debt clearance, for monthly expenses, towards savings (including emergency funds). It is said that having emergency fund up to 6 month’s survival period is good.Based on your non-negotiable expenses, decide what amount should be kept aside towards emergency fund month-on-month. Budgeting and acting accordingly to a plan is a wise idea. Though many wish to have a budget in place, not many are actually able to create and stick to the same. All it requires is a small book, a pen, a calculator and time.
- Find Ways to Reduce Debts:
Having debts is not a bad thing. But control it to the extent to which you will be able to manage the debts for few months even without income. If you are having debts more than 60% of your income then it is not considered as safe and could harm you during financial crisis. Evaluate your debts and bring them down to minimal. Use less than 40% of your credit cards and clear the outstanding regular as per monthly bills. If there are huge debts such as home loan or property loan, find ways of an alternative income to pay this even if you had to turn jobless.
- Have Plans for Retirement at All Stages of Your Employment:
Start saving towards retirement from the day you start earning. You can either redeem the interest on retirement savings and utilize or get that as well to be accumulated along with the principal. However, save towards retirement as if it is an obligation. Being employed you will be able to enjoy benefits of Pension fund, Provident fund, and even life insurance policy. These will come to help during your retirement years. Every penny you save through these will reap benefits during non-earning period such as retirement. Be careful and do not dilute these savings during job loss.
- Explore for an Additional Source of Income:
Never rely on single source of income. If your spouse is working, it is an added benefit and getting financial expenses met to a certain extent will be possible without much effort. However, also think of other sources of income through property, through investments in mutual funds, through investments in shares and bonds, etc. Additional source of income should not be used towards monthly expenses and clearing of debts, instead use it for retirement plans and funds for emergency purposes. This income should act as a backup during job loss or health issues.Quitting or losing job is a nerve-wracking experience if you have not planned your finance properly. No matter how happy you are with your income, always think for future and have a plan. Things can change overnight and you might be too late to make any decisions. And here are certain things that can help you to manage your job loss period. The minute you get to know that you are at the risk of losing job. Spare some time to go through your income-expense ratio. Based on this you will be able to judge which controllable and uncontrollable expenses are.
Once you have this clarity it will be easy to prioritize and clear off debts that will grab major portion on your income. Knowing how to manage money after a job loss is a skill, but the person who is prepared in advance for the same is considered as smart and financially safe. While you are striving to perform best in the existing job, make sure there are investments made to fetch returns during retirement period. It’s never too early to start savings, the more you save; stronger will be your financial life.