Covid-19 crisis: 6 pragmatic money tips if you’ve recently lost your job
the Covid-19 The crisis came unannounced and has seen many of our financial plans like nothing before. The economic fallout from the pandemic has resulted in widespread job losses and wage cuts, and countless numbers may find it difficult to get a new job with better or even similar perks during this lockdown. However, a crisis like the one we are currently in requires calm nerves and no panicked decisions. If your income has declined during the current phase, you need calm nerves to take stock of your finances and make critical adjustments if necessary. I’ve discussed a few tips that you will likely find very useful if you’ve lost your job in the past few months.
1. Increase your emergency fund
If you had an emergency fund worth at least 3 months of your income in place before the pandemic, use your severance payment or the full and final severance payment to increase it to 6 months or even 12 months if possible. Your emergency fund will be your central cash reserve until you get another job. You can also park part of your emergency fund in an FD for some capital appreciation and liquidate it halfway if necessary after losing just 1% interest income.
2. Follow a strict financial diet
With clogged income channels, you need to track every rupee that leaves your account and look for opportunities to cut corners wherever possible. Your spending patterns must change drastically in such a situation. You need to take strict cost-cutting measures and minimize unnecessary expenses in order to free up more money for critical financial obligations like rent, groceries, utilities, etc. The lockout period should help with this as you no longer have to spend on things like the daily commute.
3. Make sure that your critical insurance plans do not expire due to unpaid premiums
Another critical financial obligation, especially during this pandemic, is your insurance plan. Paying your insurance premiums on time must also be a top priority. Your life insurance will help protect the financial interests of your dependent family members in the event that something should happen to you, and your health insurance will protect your valuable savings in the event that one of the members needs hospitalization. If you were only dependent on your employer’s group health insurance during your employment, check whether you can continue to have it after you have lost your job after paying the premiums. This could be a cheaper alternative to buying a new plan and you don’t have to go through new waiting times for pre-existing conditions.
4. Borrow cautiously
If you are now going through a major financial crisis and your cost-cutting efforts prove limited, you might be eager to get a loan at this stage. However, you need to be very careful when taking out a loan as your finances will continue to deteriorate if you cannot repay on time. If you were planning on making a partial withdrawal from your Provident Fund account, you may feel a little discouraged knowing that unless there is an extension, the time limit to access this option has now expired. But there are a few other ways you can raise money without taking out a new loan. This could be liquidating a non-essential investment (i.e., an investment unrelated to your top financial goals), pausing your SIPs, or selling a few unnecessary items that are gathering dust in your home.
If none of these options meet your needs, you can look for secured loans, which are usually cheaper than their unsecured counterparts. This could be a gold loan, a loan against your foundation plan or a ULIP investment, a loan against securities such as suitable mutual fund investments or stocks, and so on. If not, you can avail yourself of unsecured financing facilities such as a personal loan or a credit card. associated pre-approved loan. But whichever option you choose, make sure you have a plan to repay the loan in full on time and compare your options within the same loan category for the best repayment terms like lower interest rates, processing fees and foreclosure fees before making your decision .
5. Only accept support for the moratorium if you have a clear plan for repayment
If you have serviced a home loan, you might be tempted to opt for the moratorium facility for temporary relief. However, since interest fees continue to apply during the moratorium period, the decision could result in dozens of EMIs being added to your loan, especially if you have recently started repaying your loan. So make sure you have a plan in place to be able to repay this accrued interest along with your regular EMIs through reasonable upfront payments shortly after the moratorium expires. You could prepay 120% of the deferred payments within a year of the end of the moratorium, which should bring you back to the original repayment schedule without the burden of the additional interest. This is what I call a “bounce-back plan”. If you don’t have one, taking advantage of the moratorium can significantly increase your credit burden. Also try not to use this option for your credit card fees, as these come with interest fees in the range of 3-4% per month.
6. Look for opportunities to open additional channels of income unless you get another job
Losing a job is an uncomfortable feeling; However, you also need to move on. First of all, make sure you have updated your resume and uploaded it to relevant job portals and started contacting your contacts who can help you find another job. You can also use the time in between to further your education, preferably with an affordable, if not free, online course or certification program for better career prospects. In the meantime, try looking for ways to monetize your skills and hobbies as well. This can include the inclusion of freelance projects or online tutoring. Any additional income at this stage could be of great help. More importantly, it would boost your confidence and help you overcome the shock of unexpected job loss.
Difficult times call for tough decisions. The pragmatic way we deal with them determines how quickly we can emerge from them. A little planning would help us a lot in getting out of this crisis with minimal damage. I wish you all the best!
The author is the CEO of BankBazaar.com