Recently, a well-known IT company of our country laid off more than 10,000 employees!
This news made shockwaves across all sectors. Salaried people started wondering what to do in such situations?
When any salaried employee starts a career, he/she earns required skillsets and does better to earn more income and get prominent position in workspace.
Based on this, changes in spending patterns, lifestyle and materialistic possessions take place, slowly.
People apply for loans to fund many of these needs and aspirations. On the other hand, financial responsibilities in the family also increase.
In all this, If they faces such situations, When ‘Financial situations seem better’ for them, many things collapse, financially and psychologically too!
It’s true that such situations are beyond our control but we can take care of things which are in our control!
Some simple yet important things to check and implement to better prepare for the situation- - Take a note of our cash flows-
Today, we spend easily with apps on our fingertips, but keeping a note of them takes efforts!
So, start putting little efforts. Keep the note of how and where you are spending your money. This will give you acknowledgement of your need based expenses and discretionary ones.
- Draw a budget and stick to it:
Once you know, how you are spending, you can then draw a budget. This will give you a guideline about your expenses and spending patterns too.
Try to keep a track of it once in a month.
- Increase your savings ratio:
Take efforts to minimize expenses and increase your savings. Budget will help you to attain this objective. More the savings, more is your investing capacity.
It will boost your investing capacity slowly and ‘savings’ will become a habit!
- Build your Emergency fund:
‘Emergency fund’ will keep you guarded in any unforeseen situation. Try to build this corpus equivalent to 1 year to 1.5 years of your monthly expenses. This should include expenses like Loan EMIs, children education expenses, medical expenses, Utility bills; Grocery etc. which are need based expenses.
If you are a single earning member of the family and work in volatile career space, then this emergency fund should be high enough to take care of our financial responsibilities for 1.5 years to 2 years.
When you have investments made already in liquid instruments such as debt liquid fund, bank FDs, then you can align them towards this goal. IF not, then start building the one immediately.
- Check your insurance policies:
For you, a suitable ‘Term Insurance Policy’ and ‘Personal Health insurance policy’ is a must!
During such situations like a lay-off, these policies issued by your employer, will seize. That time, your personal policies will give a back-up.
So, if you have not yet applied for them, kindly initiate!
- Pay off short term loans and credit card dues:
Short term loans like personal loans, credit card bills, eat away significant portion of our income. These EMIs are significant enough, not to ignore! When you feel the volatility in your employment, try to pay off them in best possible capacity.
This will get the debt burden off the chest and you will feel peaceful. Once these loans are paid, you can utilize your free cash flows to invest for other goals.
- Consider Passive Income:
I always emphasize on, looking at passive income opportunities. You should commercialize on any of your hobbies or skill sets to start earning passive income.
It will make you feel confident and you will have at least some income coming from other streams.
Financial management is a journey! We face many unforeseen situations which can challenge our Financial Wellbeing. However, we can be prepared and respond to such situation in best possible way!
