During a merger or sale, often companies announce a round of lay-offs or plan to downsize their workforce. An abrupt, unexpected dismissal is unsettling and throws up financial challenges for employees. However, by taking calculated steps and avoiding financial pitfalls, they could not only survive the ordeal but also come out discovering a lot about their personal finances.
Do you know where your pay cheque is going currently? Prepare an elaborate monthly budget to figure it out. The next step is to get into a financial diet. Akin to losing kilos, find items where you could do the savings. Expenditure on rent, groceries and utilities like electricity cannot be slashed entirely. However, it’s possible to reduce it creatively. Online grocery shopping, for instance, could lower grocery budgets, while minimal usage of AC could pare electricity bills. Using public transport instead of the car could cut fuel expense and so on. Dining out, shopping, and leisure travel are easy to cut down on. However, ensure your family is not missing out on the fun element.
Moreover, at this juncture, avoid big-ticket discretionary purchases like that of big screen LED TV or a car. If these steps enable you to slash monthly budgets by 20-30% from its current levels, it’s a job well done. However, plan for the worst-case scenario and arrange for an action plan to survive financially for say the next six months.
If you don’t have an emergency fund, consider part-time jobs from your hobbies and area of interests or activities relating to your work.
Deal with debt
If you must repay a home loan or a student loan, consider approaching the bank for a temporary EMI waiver. All student loans allow borrowers to suspend payments for a fixed period. However, ensure you talk to your lender before stopping the payments, as it could otherwise seriously damage your credit history. Alternatively, you can also ask lenders to increase the tenure of the loan, which in turn will reduce your EMI obligations.
However, under no circumstances, should you consider taking a credit card loan. Interest on credit card loans is the highest (up to 45% pa) among all category of loans. Any default in its repayment could quickly put you in a debt trap. Moreover, as far as possible, avoid taking loans of any kind at this point in time.
Tap financial resources
If you had built an emergency fund earlier, this is the time to use it. Also, utilize your funds parked temporarily in liquid funds and other instruments. It will help you eke out a living until the job comes back to you.
If you don’t have an emergency fund, consider part-time jobs from your hobbies and area of interests or activities relating to your work. It will give you the confidence to not take up any work that comes your way - out of desperation. Moreover, it’s possible that the temporary job itself could fold up in future as your ideal full-time job. So, ensure you are out on the go, even when the chips are down.
Harm not your retirement kitty
Most employees have the temptation to cash out on their investments under these circumstances. However, it might not be a wise decision. This is because your retirement savings are growing from market gains, even if you are not contributing for the time being. It would rather be prudent to think of retirement savings as a necessary expense and add in whatever way possible from the slashed budgets. If it is a stretch to invest, at least consider rebalancing your portfolio (equity, debt mix) to ensure it’s fully optimized.
In the end, it’s vital that you have greater control over your finances while seeking a job. It will not only give you the necessary confidence but also prove to the world that every cloud has a silver lining.