Belt-tightening measures key to surviving pink slip, say experts

Cautious spending, reduced debt burden, and opting for gig work can help

Over 23,000 start-up employees have lost their jobs since 2020, according to staffing firm TeamLease. While coping with the emotional impact of a job loss isn’t easy, here are a few steps you can take to cushion the financial blow.

Monitor budget, curtail expenses
 

Begin by tracking your spending. This will help plug unnecessary leakages. Sanjeev Govila, a Securities and Exchange Board of India (Sebi)-registered investment advisor (RIA) and chief executive officer (CEO), Hum Fauji Initiatives, a financial planning firm, says, “Review your budget and cut it by at least 25 per cent.”

Even if you have some emergency funds, consider cutting down on your current lifestyle expenses. Those who don’t have an emergency corpus must cut expenses aggressively. Lovaii Navlakhi, board member, Association of Registered Investment Advisors (ARIA), says, “Identify discretionary expenses that can be avoided or postponed for now.”

Keep family members informed about the steps you’re contemplating and incorporate their suggestions on expense reduction.

Go cash only
 

Stick to cash payments only. M. Barve, founder, MB Wealth Financial Solutions, says, “Research shows your brain thinks differently when you pay in cash than when you use cards or payment apps. Digital payment leads to more impulse spending.”

Restructure home loan  

If you are unable to come up with the EMI, especially on your home loan, contact your lender and explain your current financial predicament. Pankaj Mathpal, managing director, Optima Money Manager, says, “Ask for restructuring or rescheduling of the loan. Request for a lower interest rate as well.”

If your current lender doesn’t cooperate, look for one willing to offer a better deal on interest rate and tenure.

If you have a high balance outstanding on your credit card, try to replace it with lower-cost debt, such as a loan against fixed deposit or gold.

Hunt for gig work, check job loss cover
 

Even as you look for a full-time job, try to generate alternative income by taking up consulting or freelance work.

Job loss insurance is available as an add-on or rider along with personal accident, critical illness, and home loan protection plans. Check if you have this add-on in any of your policies.

Certain conditions must be fulfilled to receive this payout. Kapil Mehta, co-founder and CEO, SecureNow, says, “The insurer will require proof that you were terminated and haven’t got another job. If the employer gives attractive benefits, such as a long notice period, you may not receive this payout.”

While you still have your job, you should ideally buy a personal health insurance cover. Govila says, “Never depend on employer-provided medical insurance alone.” If you don't have it, buy one now.

When lone breadwinner is laid off
 

Things can turn desperate for families that have zero income coming in.

M. Barve, founder, MB Wealth Financial Solutions, says, “If you are in dire straits and wish to borrow, you are likely to be charged a high rate of interest.”  

Try to raise money by selling off junk. Govila says, “Get rid of the unnecessary assets which you had anyway planned to dispose of, like furniture, a long-unused vehicle, and maybe even a painful stock or real estate investment.”

Don’t miss out on life, health and auto insurance premiums, even if the amounts to be paid are high. Govila says, “Talk to the insurers to see if the frequency of premium payments can be altered or they can be temporarily halted.”

While you should avoid dipping into Public Provident Fund and retirement savings, Mathpal says you may stop regular investments temporarily.   

From double to single income

The situation is likely to be less desperate for families where one of the spouses continues to have a job.  

Barve says, “Avoid big-ticket purchases. This is not the time for an upgrade.” 

Barve suggests using the severance package (generally two to three months’ salary) to prepay an existing loan and thereby reduce the EMI burden on the working spouse’s income.

Key points to know about job loss insurance

The cause of job loss determines whether you get a payout from this cover: Termination without long notice period maybe covered but not resignation.

Job-loss insurance: Points to remember

• The cause of job loss determines whether you get a payout from this cover: Termination without long notice period maybe covered, but not resignation
• Job loss due to poor performance and termination during probation  may also not be covered
• The premium for this cover is around 3-5 per cent of the sum insured (and is in addition to the primary policy’s premium)
• The job loss cover that comes with  a home loan protection plan is usually available for five years
• Here, the cover pays the home loan EMI for three months or so