Save up for a contingency fund
If the thought of losing a job has you breaking out in a cold sweat, build up a contingency fund when the going is good. That is the cornerstone of any good financial plan. Your contingency or emergency fund should be able to take care of your regular monthly expenses for at least 3-6 months. If you constantly replenish this fund, you will be able to handle a crisis situation like a job loss without being worried about your next EMI payment.
Take stock of the situation
If you have just lost a job, don’t panic. First things first, tally your monthly expenses. Make a list of the EMIs you need to pay and your other necessary expenses that you can’t skip. Next, create a survival budget with the bare minimum and see for how long your contingency fund can keep you afloat. If you have been a diligent saver, chances are that you may have a few investments you can liquidate from your contingency fund and meet your financial commitments, till such time you get another job.
Cut back consciously
Although it seems like stating the obvious, at a time like this, it is of utmost importance to take a long, hard look at your expenses. Revisit your budget at times like this. Obviously you cannot compromise on your debt repayments, but you can indeed prune other expenses such as gym memberships that you do not use or move to a lesser expensive mobile or internet plan and other such expenses that you think you can do without for the time being.
Better ways to service debt
If you are servicing a high cost loan, you should make an attempt to either clear it off or switching to debt with a lower rate of interest. Servicing high cost debt is never a good idea, especially when you are living on a reduced income. Even when things are going good, make sure that your credit card bills are paid on time so that you do not build up a debt pile that becomes too large to handle. This will also ensure that you have a healthy Cibil score at all times.
Look for alternative sources of employment
If you have just been laid off, getting onto another job you like may take some time. Instead of rueing about your misfortune, think of making a few bucks by milking some talent you have as a stop gap arrangement. For instance, if you are good at graphic designing you can create websites. If you have done such things earlier as a hobby, you may want to use your professional network as well social media platforms to see if you can put your talent to good use. The good news is, with the power of the internet today, spreading the word and getting a freelance assignment is not that difficult if you really make a sincere attempt.
Do not forget your retirement fund
A common mistake that people make when they lose their jobs is stopping to replenish their retirement accounts. If you have managed to procure a few freelance assignments and your emergency fund is taking care of your important expenses, make sure your contribution towards your retirement fund does not slow down even in the period that you do not have a job.
Losing a job can indeed be a nerve wracking experience, but more often than not, our fears turn out to be greater than reality. As long you have an emergency fund, a supportive family and some good friends who are with you in your times of trouble, you will be able to tide over this problem sooner than you think!
The author is Co-Founder & Director, CreditVidya