In today’s volatile and uncertain economic world, there is no telling when one might be handed the pink slip.
Unfortunately, downsizing and layoffs have become all too common these days and chances are someone you know has been through the same. When one is suddenly left unemployed or laid off from a job, the first thought that usually crosses the mind is how will the finances be managed?
A layoff forces you to start over, from scratch, which can be frightening and challenging. The situation worsens if you’re liable to pay any long-term loan or debt because the burden of EMIs becomes challenging until a new job is secured.
If you’ve been recently laid off and are struggling to come up with a plan for the future, don’t lose hope; all isn’t lost yet. You can lessen this blow by doing a few things until you get back on your feet. Let’s discuss everything you need to do before, during, and after getting laid off to stabilize your life and finances.
How to Get Out of Debt without Any Income?
The first and foremost thing to take care of as soon as you get laid off is your financial debt(s). The following tips will help you deal with this issue:
- Create a list of available funds
Make a comprehensive list of all the funds available to you as soon as you lose your job. You may have some emergency funds or savings. Use these funds to create a survival budget to manage your finances until you get a new job. As a rule, allocate the budget for your family first and then move on to the creditors. Trim down expenses, change to cheaper phone plans and TV channels. Also, get rid of the services that you can live for a while; like magazine subscriptions, newspapers, etc.
- Prioritize your debts
If you are still not able to find sufficient funds to pay off your debts for the next few months, you need to start prioritizing your debts. For instance, if you’ve borrowed from different sources like banks and family members; talk to your relatives about your situation and consider delaying their interest as opposed to defaulting on EMIs. Also, you must conserve the amount of cash you have by paying off the minimum amount on credit card debts. Keep the balance at the lowest and avoid further use of cards.
- Negotiation your debt
If you have borrowed from private money lenders and family members, approach them to change the terms of the repayment. You may extend the repayment schedule to pay more interest or pay a lump-sum amount later on in the future.
How Do You Manage Money when Unemployed?
If you have been suddenly laid off, the following tips can help you manage your finances optimally:
- Focus on necessities and eliminate luxury
Once unemployment hits you, you need to clearly understand which things are essential and which ones are luxuries. Food, utilities, shelter, and similar items are necessities. Whereas, eating out, shopping for new clothes, spending money to see a movie, etc., are all luxury items/activities; they need to be limited once you become unemployed.
- Discuss your severance package
A severance package is a pay and other benefits that an employee receives if they are made to leave the organisation unwillingly and it usually consists of a few months’ wages. Since all companies do not offer these packages, contact your previous office’s administration section and find out the scope and procedure involved in getting the compensation as soon as possible. Get your full and final amount as soon as possible to get access to some capital.
- Upgrade your skills and seek placement assistance
There are several programs that help individuals develop and even offer the necessary financial aid to the unemployed. Enroll yourself in such programs and sign up for job fairs and government unemployment schemes to avail maximum benefit and support.
How to Survive Financially After Losing a Job?
If you are not careful enough, you may find yourself in a dire situation after losing your job. Here is what you can do to survive financially after you lose your job:
- Adjust down your budget
Keep a close eye on your everyday expenses and revamp your budget accordingly. As mentioned earlier, cut out all the unnecessary expenditures and focus on dedicating your budget to obtaining the essentials for living and to pay off the debts. Although this is a temporary change to your lifestyle, you must get accustomed to being mindful of each and every expense.
- Look after your investments and retirement plan
In case you are investing regularly or contributing to a retirement plan, you need to evaluate if you can continue putting money in the same. While most investment tools have flexible payment options, retirement schemes and plans usually have more stringent conditions. Get in touch with the organizations and consider reducing your contributions temporarily. Avoid taking out money from your retirement fund prematurely.
- Consider getting a personal loan
In case you are not able to cover your basic expenses with your savings and emergency funds, you may have to look for ways to get funds. The best way would be to opt for personal loans that are offered by several banks and financial institutions. Since personal loans are unsecured, you wouldn’t be required to offer any collateral or securities. What’s more, you can use the personal loan amount as per your requirements.
However, you must quickly find a new job as if you default on the loan, you will fall into an inevitable debt trap and your lender will start the recovery process to recoup the loan amount.
At PaySense, we offer unsecured personal loans up to Rs. 5,00,000 without any collateral. However, you must meet the eligibility conditions for the same. To know more if you are eligible for a loan from PaySense, know more here.
What to do Before Getting Laid Off?
Most individuals are told a few days, or weeks, in advance about the termination of their employment. Here’s how you can use this time to prepare for the next few months:
- Start preparing in advance
Review all your finances, take a look at where and how much you are spending, and make note of the expenses that can be avoided. Prepare for a lay off as though you already have been laid off. Completely cut off all the luxuries from your life and save up to create an emergency fund if you do not already have one.
- Think short-term
During such times, it is best to avoid putting money in long-term investment tools and retirement schemes. Your first priority should be to have enough money to get through the next six months at least.
- Do not ignore your health insurance
Keep your health insurance plan running. Illnesses and diseases can come unannounced, and once you are laid off, dealing with the payments of treatments may become more challenging than usual.
- Keep credit card only for emergencies
If you know that you are going to get laid off, get rid of your credit card immediately. While you may be tempted to use your credit card, the fact is that you do not know with certainty when you would get a new job, and the credit card debts, with their high interest and penalties, can soon become a massive burden.
- Try your hand at a side hustle
Start dedicating your time to build an income stream as soon as possible. Look for a new source of income immediately, which is either by finding a new job, working part-time, or even freelancing. Consider if you can rent out a part of your house to get some extra money and if you’ve lend money to friends and family, consider asking it back.
Tips to Survive a Layoff
While you may not be able to gain control over when and why you get laid off, you can control your situation after getting laid off. The following tips can be of great help for handling a layoff:
- Avoid panicking
Panicking not only provides additional stress, but also makes things seem worse than they truly are. If you start panicking, your mind will not be able to rationally gauge the future scenario, and you will not be able to manage yourself as well as your financial situation efficiently. Remember, this is a temporary setback and as long as you are healthy and have all the necessary skills, you will find a suitable job for yourself soon.
- Listen to your ex-employer
Listen carefully to whatever your employer says while laying you off. Come back home, write down whatever you remember. While a few factors outside of your control might have resulted in you losing your job, it might be a good idea to seek feedback on your skills, performance and achievements to prepare for the future.
- Get your finances in order
A major thing to take care of after being laid off is your finances. Sit down and list out each and every expense of yours. Determine your average monthly expenses and evaluate if you have enough resources to get by for the next six months.
- Assess your skills and knowledge base
Take some time to analyse the skills which you possess. List them out individually, along with your knowledge base. Now think about which direction you wish to go in. If you believe that you need to learn new skills or brush up existing ones, do not waste any time and enrol for relevant courses.
- Update your resume
Once you have strengthened your skill base, update your resume accordingly. There are several guides and tutorials available online which help you curate an interesting resume. Make use of these guides to create a striking resume that highlights your skills and achievements.
- Start hunting for a new job
Finally, start looking for a new job. Spend enough time looking for relevant job posts and advertisements. Ask your friends and other people in your network to recommend you to their organisations, reach out to old friends and college acquaintances and leave no stone unturned to land a new job.
At the end of the day, being laid off is not easy and you will have to work harder than usual to bounce back from this setback. However, if you prioritise your finances and take care of your overall budget, things won’t be as bad. Sure, you might have to cut back on expenses and items you’re used to, but remember, this is a small obstacle in the larger scheme of things. Instead of looking at this as a negative downturn, view this as a positive challenge that can help you turn things around.
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