Know How To Manage Your Finances After Sudden Job Loss

It may be difficult for people who have faced sudden job loss to manage their financial matters. However, you can ride through these tough times with a bit of planning and strict financial discipline.

Try to curb the expenses which are at the bottom of your priority after a job loss

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The global economy has faced several setbacks starting with the Russian-Ukraine war last year to massive layoffs announced by the technology companies and now the collapse of the US bank. In such a scenario, companies have gone ahead with restructuring plans and cutting jobs to sustain their operations. In India, too, the layoffs have impacted a lot of people with many of them sharing their ordeals on social media.

It may be difficult for people who have faced sudden job loss to manage their financial matters. However, you can ride through these tough times with a bit of planning and strict financial discipline.

Here’s how to manage finances after a job loss

Cut down on spending

If you continue to spend normally after losing a job, you may exhaust accumulated funds causing financial distress. You need to take tough decisions and curb expenses.

Firstly, start by listing all your expenses and determine the expenses based on their priorities. For example, some expenses are crucial. These may be categorised as rent, electricity bills, food and vegetable payments, school fees, etc. Start curbing the expenses which are at the bottom of your priority. These may include spending on items such as OTT subscriptions, club membership, restaurant expenses, holiday travel, etc.

Revise Your Budget

Once you have brought down the expenses, you can revise your budget to make it easier for you to meet the same using the available funds. Such a fund is usually called an emergency or contingency fund. Ideally, such a fund helps in meeting expenses for 8 to 10 months in absence of a regular income. Other necessary expenses can be debt repayment and critical investments, including insurance payments, etc. using your contingency fund. This means you need to adjust the normal budget by shifting the payments towards essential payments and curbing expenses that you can afford to be delayed. This means that till you get a job you can also suspend some of the SIP investments, and stop the bank RDs. You can also avoid using a personal car to save on fuel expenses and focus on maintaining an adequate level of liquidity.

Talk To banks for moratorium period

In absence of regular income, repaying existing debts becomes difficult. This can pose to be a bigger problem with time because if you fail to repay the loan EMIs or the credit card bill, it can also impact the credit score negatively.

In such a scenario, make sure you immediately plan how to ensure timely repayment of your debt. In case of difficulties in repaying the debt, you may explore options like getting a moratorium period or extension in the repayment period to reduce the EMI size.

Bank on FD, Other Plans 

It is also important to remain in contact with your close friends and relatives who can support you financially. In case of any emergency situation, you can also explore taking loan options such as OD against FD or LIC policy, personal loan, loan against gold, loan against mutual funds/shares, etc. The loan should be the last resort if you fall short of contingency fund.

Try alternate income options

Most importantly, remember this is a temporary phase in your life. Focus on your mental health and keep looking out for new opportunities. You can also look for temporary income options such as a part-time job or freelancing based on your skills.  Moreover, collect your severance package and all dues. Your severance may be worth at least a month’s pay. Unless any need arises, don't opt for liquidating your PF holdings.