When job loss wrecks your finances

Krishan, an old acquaintance, called me a few days ago. He used to be a colleague at a bank where I worked in the noughties. He is now in his late 40s and worked at a senior position in a non-banking financial company. After the preliminary pleasantries, Krishan informed me that he had lost his job in the pandemic and is now looking for another. He sought my assistance in identifying options for him. 

I asked him to consider a professional upgradation course instead of immediately jumping into another job. In any case, jobs for a person of his seniority and profile are not easy to find at present. Krishan agreed but told me his financial position does not allow him that luxury. He had bought a lavish home with a concessional loan from his employer. He had just about managed to clear off that loan by using his final settlement amount received from the employer, including accumulated Provident Fund and other dues, and by selling off his mutual funds and equity shares. The only significant asset he is left with is another residential property that is rented out. Even after accounting for rent, he pays a sizeable EMI every month on the loan taken to buy this property. In addition, his child studies overseas. 

Krishan is unable to sell either of the two houses due to the pandemic. He was at his wits’ end regarding how to meet his ongoing expenditures and prevent a default on his second home loan. 

Many people have been even worse affected. Unlike Krishan, they do not even have illiquid assets they can hope to sell in the future. The advice I gave to Krishan may perhaps be useful to other people as well who are caught in a similar dilemma. 

Whatever you do, continue to pay your loan EMIs and insurance premiums for term and health policies (not investment-based policies) on time. Then try to buy yourself some breathing space. If you can, borrow (on a payable-when- able basis) some money from friends or family to tide over the next few months. If this option is not available, sell or redeem dead assets that are easy to liquidate, such as jewellery, car, investment-based insurance policies, etc. 

Take a hard look at your other assets, especially your home. Do zero-based budgeting: Would you buy the same house if you were to take the decision now? If not, try selling it. If that is not possible currently, then rent it and move to a smaller rented house. You will thus be able to earn some additional income even as you try to sell the house. 

Use the time on your hands to declutter your life. Close infrequently used bank, demat and broking accounts and consolidate your holdings. 

Use the internet to search for work. Do short-term contract assignments either directly or through companies that provide such services to large corporates. Also, try to upgrade your skills by opting for one of the specialised courses available on MOOC (massive online open courses) platforms, many of which are from reputed providers and are free. Many of them cost money only if you need their certification. Even if you cannot afford to pay for the certification, do the course to gain the skills that may land you an assignment. 

Talk to your mentor or advisor. You will realise you are not alone in your dilemma. Many people are worse off. 

I have not suggested belt tightening, assuming this will be done in any case.

The writer heads Fee Only Investment Advisers LLP , a Sebi-registered investment adviser