Losing a job can be tough on your finances and mental health. It’s crucial to manage your finances carefully at this time. Start by cutting unnecessary expenses and focus on essentials. Create a monthly budget to prioritize fixed costs like EMIs, insurance, and loan payments. Reassess your investments taking into account a long-term view.
Avoid liquidating your retirement savings. If you are short on cash, consider borrowing from reliable sources like friends or family, but avoid high-interest loans. Lastly, take care of your mental health, stay positive, and use this time to sharpen your skills and search for new job opportunities.
Here are some useful tips for managing your money after a job loss.
Cut Your Expenses
If you just got a pink slip, your monthly cash inflow will be reduced drastically. So, slash your miscellaneous expenses first. Less frequent ordering of food, cut down on going out every weekend, eating outside; instead, cancel the gym membership or OTT subscription that you hardly use. It may be tough to eliminate all discretionary expenses all at once, so reduce them to the bare minimum, if possible. For instance, instead of dining out, plan a family movie night in your home.
Prepare Monthly Balance Sheet
Ensure to pay for fixed expenses such as insurance premiums, loan EMIs, credit card repayments, and monthly instalments for mutual fund SIPs. If you don't have enough savings, you must prioritise the investments. Stop your monthly SIP if finances remain tight. In case of home or vehicle loan, you may ask your bank to reduce the EMI amount by increasing the loan tenure. You may communicate your situation to your insurance company. See if they can change the periodicity of payment of premium or reduce cover amount temporarily.
Reassess Your Investment Portfolio From a Long-Term Standpoint
You will have to prune your expenses. However, do not liquidate your retirement corpus or long-term investment goals. Look at how much you spend per month and see where you could save. Check your investment portfolio and make changes over a period of time in keeping with your long-term view of your financial goals. Do not make abrupt or extreme changes due to short-term market events or emotions.
Money Crunch? Borrow From Reliable Sources
If you do not have an emergency corpus, use your bank savings to see this period. If that is inadequate, you can begin liquidating your existing investments. If you have invested in mutual funds, you could even consider redemption. Choose wisely if you need urgent cash flow. Make sure you are not borrowing money from places at exorbitant interest rates, thereby getting into a debt trap. You can also reach out to friends and family to borrow some money to survive this period. You can always repay it later when you get a job again.
Take Care of Your Mental Health
Layoffs are merciless. They come with a load of negative emotions that will derail you. Take it one day at a time. If you are feeling stressed, reach out to your friends, family, or even a therapist - free resources are available.
Finally, remember that a layoff is often not personal. Try not to be disheartened by the job loss and use this time to sharpen your skills for higher job security.
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