One of the worst side-effects of the ongoing war and the post-pandemic economic situation is the job losses across many sectors. The job market is flush with news of job cuts in many companies like Amazon, Twitter, Meta, etc. where thousands have lost their jobs overnight without warning. Losing a job is a financial jolt not only for a person but also for their family. Dealing with this situation requires careful planning to navigate this crisis and tide it over till such a person is financially sound again. Below are a few ways to deal with finances in case of a job loss.
What are the steps to manage finances after being laid off?
Managing finances becomes one of the topmost priorities when a person faces a job loss situation. Some of the ways to manage this situation are highlighted hereunder.
- Combine all the available funds
The first and foremost task at hand should be knowing how much funds are currently available to tide over the immediate financial crunch. After ascertaining all the available sources of funds like savings, investments, assets, emergency funds, etc. This act of combining all the funds will help in optimum budgeting which will further aid to survive this situation.
- Cut back on expenses and draft a strict monthly budget
The next step is to curate a tight monthly budget and stick to it to survive these unfortunate times. While drafting the budget it is essential to understand that the budget should include only essentials like groceries, rent, debt repayments, etc., and not frivolous or avoidable expenses. Some examples of these expenses can be the OTT subscriptions that have become a norm or may even seem essential to some but are in fact completely avoidable. Cutting down on expenses is a temporary change that can be revisited once things are back to normal.
- Negotiate severance package
When a person is let go the company offers them compensation for such action. This compensation is known as a severance package. The highest negotiation power for a severance package is at the time of hiring when the person is needed by the company. Therefore, at such times, a person can ensure to include the preferred clauses relating to their severance packages. Even at the time of termination, employees can try to negotiate their severance package with whatever little leverage they can find. This severance package will be a lifeboat till the time that such a person will get a new job or another income source.
- Restructure or refinance your loans
It is quite normal to have a few debts in today’s times. It can range from a normal credit card debt to having a home loan. In the event of a job loss, a person can seek the option to refinance their loans at the same time prioritize the repayments. In most cases, big-ticket loans like home loans can be refinanced or restructured, but if that is not the case, it is prudent to repay the loans that have higher interest costs (like credit card dues or personal loans) at the earliest. Defaulting repayments of these loans will only increase the amount to be repaid and have a long-lasting impact in the form of negative remarks on the credit reports.
- Seek an alternative source of income
The recent pandemic had given ample chances for employees to set up side gigs with work from home has become the norm. These options can be cultivated over time to become a good source of alternative income. Such income can be life support in case of a job loss. If a person does not already have this benefit, a situation like a job loss can be used optimally to start looking for an alternate source of income to stay afloat during such a crisis.
- Seek a personal loan only if your savings run out
Getting a new job after a job loss can be quite difficult, especially in today’s job market when the opportunities are lower. Therefore, there could be a case when a person can lose out all their savings with no clear avenues to having a new job. In such a case, one can take a personal loan which can be sought quite easily using minimum KYC. However, getting a personal loan comes with its own set of worries. Repaying the personal loan on time is quite essential as any default in the same will lead to a fall in credit score and damage the future ability to take any loans.
- Seek professional help for job hunting
Job hunting is not as easy as one thinks. It takes months to land a decent job, especially without any professional assistance. Today there are multiple recruiter portals that can help in securing new jobs based on past experience ad expectations. Taking the help of these professionals should be a priority rather than waiting for an opportunity to land in one’s hand which is quite frankly a rare case.
- Do not stop health insurance or term insurance premiums
In the event of a job loss, a person is forced to cut down on their expenses. However, a key point to note is to not miss out on health insurance and term insurance premium payments. These are essential assets that are needed by every person and their family to meet their immediate needs as well as long-term needs. Dealing with health emergencies in a financial crisis can lead to huge stress and add to the already piling worries for the person and their family. Therefore, while making the monthly budget, it is important to ensure that there is sufficient provision for health insurance and term insurance payments.
- Stop waiting for the perfect next job
There is a saying that beggars cannot be choosers. Well, that does not directly apply here in case of a job loss. But it is also a fact that in a job loss situation, it is not ideal to wait for the perfect job and lose out on less lucrative opportunities that come your way. Once back in the job market and without the constant worry of making ends meet, one can always keep looking for better opportunities and take them up.
Job loss is one of the most unfortunate situations which can shake up all the plans and financial goals. Therefore, one needs to reevaluate their finances and ensure a proper plan is chalked out with the help of family. The support of family is also an intangible asset that will help can provide not only a morale boost but also a much-needed confidence that often stands shaken after job loss.
Budgeting the monthly expenses during a job loss assures the person that they are aware of the available funds and the necessary expenses to be met through such resources.
Quite quitting refers to putting in the minimum required effort to meet the job requirements and not taking any extra initiatives or showing any enthusiasm. There is no situation of job loss in such cases.
Severance pay is the compensation offered by employers at the time of termination of employees. This payment can be used by the employees to meet their daily expenses till the time they get a new job.
Lay-offs are usually when the company wants to cut down their employee force to meet targets like cost cutting or saving the company from being overstaffed. On the other hand, being fired is on account of the employee’s own fault or errors (one or more) made by them during the course of their employment.