Job losses are common in a recession. Sectors like IT and Telecom have low job security. Whether you work in these sectors or in any other, it is wise on your part to provide for such contingencies. If you have lost a job, don’t lose hope. It’s better to be prepared for such an adversity, when you still have the time.
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Get your finances in order. Very little help comes in these tough times. Finding another job is the only solution. This is how you can deal with a job loss, till you find another job:
It is more important than ever to manage your finances, when you lose your job. Sit down with a pen and paper or work with an excel sheet. Jot down your monthly expenses and create a budget. This will give you an idea on how long you can live off your savings. You should have liquid investments like liquid mutual funds or FDs in the portfolio. If you had done this, you will have investments that can be liquidated easily. This gives you more time to search for your next job in a relaxed manner. You will not end up in a wrong or unsuitable job.
First, pay off your bills. If there are bills which can wait, then put them on hold. In short, prioritize your bills in this order: rent or home loan EMIs, utility bills, food, insurance and medicine. Look for less important expenses which can be eliminated. Cut off your TV cable. Cut off Netflix.
Monthly spending often goes haywire. After getting laid-off, you cannot take chances. Therefore, draft a weekly budget. A weekly budget is much clearer and easier to stick to. Don’t be surprised if you save a little extra.
The general notion is to stay far from debts. But, it is doesn’t help when you have no source of income. A job loss turns your world upside down. Do not pay off those debts in a hurry. Make slow repayments.
Stay away from your retirement savings. You will not enjoy the benefits of compounding interest if you do so. All those years of growth and compounding of funds will go for a toss. Ask yourself this question, can you put back the money, once you take it out?
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Do not exit from existing investments till absolutely necessary. You will end up jeopardizing your long-term financial goals. If you really need the money, start liquidating your bank FDs, move to debt funds and then partially withdraw from other investments. Don’t stop paying insurance premiums.
Should you stop SIPs? This depends on the funds available at your disposal. You may reduce the size of SIPs, pause or delay but do not stop if the cash crunch is not severe.
8. Home loan EMIs:
Whether it is your first home or a second home, it is an important asset. You may find it difficult to continue paying the EMI's given your situation. Missing EMIs can affect your credit score. Delayed payments for a period of less than 90 days are considered minor defaults but a delay beyond that makes you a defaulter.
Inform the bank of your inability to make payments. You may request for an EMI holiday for some time or cut down on the EMIs. This will increase the home loan tenure. You can revert to the original EMIs once you become financially stable.
Refrain from using your credit card. It will lead you to the debt trap. A credit card can create havoc with your finances, if not managed well. Remember, you will have to pay an interest of 24-36% a year if you extend repayments beyond the interest-free period.
According to new EPF rules, you can withdraw 75% of your EPF balance if you are unemployed for 30 days and 100% in case you are unemployed for 60 days or more. However, you will have to pay taxes if you haven’t completed at least five years of continuous service.
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