Losing a job is never on anyone's to-do list. It happens out of the blue when you're unprepared. It's easy to start panicking when it happens. But being stressed is never a productive state of mind and you are unlikely to make any sensible decisions in that state. Keeping your cool is very important for meticulous job-hunting as well as prudent money management.
While you're waiting to take the next step in your career, you need to take some financial measures to safeguard your lifestyle and make sure you have enough money for short-to-medium term sustenance. Here are some tips to help you through the difficult time:
1. Dig into Your Emergency Fund Judiciously
One of the most important financial lessons is to create and maintain an adequate emergency fund. "Adequate" may mean different things to different people depending on their financial commitments, but the general rule of thumb is to have an emergency fund worth at least 6 months of your current income. So, if you have created this fund, job loss is one of the emergencies that mandate borrowing from it. But don't deplete your savings and investments completely, because life does not function on a one-problem-at-a-time rule and you may still need money for other exigencies. Also, try to replenish your fund as quickly as possible once your finances stabilise.
If you don't have an emergency fund, take this as a lesson and start one the moment you get a new job. If you have excess money in your savings account, you may consider transferring a part of it to a higher-earning fixed deposit account to start the process.
2. Create a Savings-Expense Balance Sheet
If you have ongoing loan or credit card repayments, things are likely to get a little tricky to manage. You can neither stop paying the EMIs nor is it advisable to take additional loans to pay them. Take stock of the savings you have and measure them against your monthly financial commitments and liabilities.
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If your savings can sustain the EMIs plus your regular household expenses for the next 3-4 months, then there's no need to panic. If your savings are not enough, then prioritise repayments of loans with the highest interest rate. Also, stop using your credit card immediately because that has one of the highest interest rates.
Create a back-up plan. If you've lent money to someone, this is the right time to ask them to repay you. If your savings are negligible, consider asking a friend or a family member to lend you some money for a short period.
3. Go on a Financial Diet
Cut down all your miscellaneous expenses. Stop ordering food twice a day, shift to public transport instead of cabs, and cut down your weekend party and movie expenses. Check your credit card and debit card to see if there are any apps or services for which you've set auto-debit instructions. If you have, then cancel or suspend the subscriptions immediately.
Cutting corners in whichever way possible is the key. Don't renew your annual gym subscription, work out at home instead. Meet friends at your home or a park, and minimise your trips to restaurants and pubs. Selling things gathering dust at your place, cooking at home, discontinuing cable TV subscription if you're glued to internet content are some other money-saving hacks.
If you'd already made international travel plans, you may want to call them off (hopefully you made cancellable bookings!), because you'll end up spending more when you reach the destination.
4. Prioritise the Essentials
It's easy to panic and liquidate all your ongoing investments. But that's not going to help you in the long run. If you are invested in a mutual fund SIP, keep enough money aside from your emergency fund to be able to continue it for at least 3 more months.
Don't miss your health insurance premium, because that's the one thing that'll definitely take care of a medical emergency. If you have dependents, you can't also afford to skip your life insurance premiums.
5. See If You Can Generate Income Through Side Gigs
While you're furiously job-hunting, see if you can use your talents and expertise to generate money. Maybe you're a writer-then you can do some freelance content writing or advertisement copywriting. Maybe you're a good photographer-upload them to stock photo sites for royalty, or look for paid photography assignments. Maybe you're a musician or a part-time stand-up comic-look for paid weekend gigs or even open mics!
You could give private tuitions or online lessons on a subject you're good at. If you know a foreign language, there's likely to be a good demand for tutors, translators, and interpreters. Even coding and programming jobs are open to freelancers these days. If you're an expert in a subject, you can also start your YouTube channel. If the video content is good, it will generate income.
For all you know, one of these side-income sources might actually open up a new career path for you!
6. Keep Calm and REFINE YOUR JOB SEARCH
The most important thing is to keep your cool and not fall into despair. Remember that losing a job is not necessarily a reflection on your skills or capabilities. You will find another job soon if you look actively.
Job hunting can be stressful, but a systematic and smart approach to it will make the process easier to deal with. Start with sprucing up your CV (visually appealing formats work better these days) and your job portal profiles. If you are not already active on career portals, get back there and start networking among your connections and within your industry. Also, don't depend entirely on the job portals. Reactivate your network, reach out to old colleagues, and try to apply directly for jobs. You may also want to step out of your comfort zone and look for lucrative opportunities in other locations.
You can also check for free or cost-effective online courses to learn a new skill in your domain and do it. Don't be blinkered in the kind of jobs you search for-maybe your skills can be used in a completely different industry; so, search with an open mind. In the end, just believe in yourself and don't let self-doubt creep in. Such testing times bring out the best in us and make our individual journeys a lot more meaningful. Wish you all the best!
(The writer is CEO, BankBazaar.com)