In the boom days of the first decade of this century, jobs were abundant, and even if you were given a pink slip by one company, there was a new employer welcoming you just as you stepped out of your old office. Much of that euphoria seems to have died down. Job losses are quite real, with sectors such as telecom, ecommerce and IT bidding adieu to employees quite regularly. And the scale of these lay-offs isn’t small.
If you thought manufacturing jobs were safe, even those hopes have been shattered as engineering conglomerates too had to show many workers the exit door to cut costs over the last few years.
While upgrading your skills, relocating to a place with better opportunities and networking are some of the steps you need to take to get back to gainful employment, what about money matters when you are cooling your heels? Take action to avoid getting into a financial mess in case of an unfortunate retrenchment. If you are in a volatile industry or in a start-up, you should always start preparing for a rough ride early on into your job.
Preparing a kitty
Accumulate at least six months’ expenses as an emergency fund. While calculating these expenses, include EMIs and all monthly charges towards telephone, electricity, grocery etc. You must also include kids’ school fees, insurance premiums and rent. To be more conservative, add your monthly investment in mutual funds (SIPs) or recurring deposits. The emergency fund must be kept in your savings bank account or in a liquid fund, so that it is available on tap at any point in time. This fund must not be looked at from a return’s perspective. Creating this contingency fund is vital before you go on any spending binge.
Once you accumulate this amount, you can search for a new job without the extra anxiety of figuring out how to pay your bills and EMIs. Do not dip into this kitty unless there is a critical emergency.
If you work in an industry where skills are niche, or where new jobs are far and few between, you could increase the contingency corpus to about nine months or one year’s expenses. If you and your spouse are employed, each one can contribute one half towards accumulating the amount.
Keep insurance going
Keeping your health cover operative is important when you are in search of a job. Your spouse and kids must be included in the policy.
In case you have dependent elderly parents, ensure you have taken a health cover for them and paid the premiums regularly.
There are dedicated senior citizen insurance policies available. The cover must be taken while you are in your job.
If your company’s group insurance policy allows parents to be enrolled and you have paid the premium, check if the cover will continue even after you exit.
You should also factor in the out-of-pocket expenses towards medicines for your parents and yourself while calculating your contingency kitty.
Trimming expenses
It is good to keep expenses in check even during the best of times. Be doubly careful when you have or are on the verge of losing your job.
Credit card bills should have been paid in full while you were still in your job. There should be no compromise on this aspect, as interest rates are exorbitant.
Use credit cards sparingly. One risky strategy would be to make minimum payments on your credit card to keep your cash flows smooth.
This is with the idea of paying off the entire balance as soon as you land a new job. But this would be highly risky, as you may not get a job as planned or may have to settle for a lower salary.
Ensure you do not dip into your MF investments, PF or FDs, till your emergency corpus keeps all expenses going. Dipping into them would not only hurt other long-term goals, it would also give rise to tax liabilities while liquidating them.
You may stop or pause your SIPs temporarily so that cash flows do not become too tight.
Taking these measures in advance would ensure you are well prepared for tough times.
That way, you can stay focused on the most important thing on hand after a lay off — finding a new job.