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How to Financially survive a Layoff?

Updated: Feb 28

With India’s top airline Jet Airways going bankrupt, thousands of employees were laid off. Layoffs today are for real. Be it in a small entity or a big business with giant market share. Whether a company is in financial distress or wants to cut costs or simply not satisfied with the performance of its employee, the writing on the wall is not obvious.

One can never be prepared for a job loss. Not mentally. And 99 per cent are not prepared financially either. The thought of a pink slip would not even cross the mind when the going is good. Obviously, one wouldn’t really take any concrete steps to prepare for the future which could not be foreseen. At the least, people have got some emergency fund, which they don’t even know is enough to weather rough times.

The axe may fall on you, irrespective of whether you are working in the junior, middle or senior most level in an organisation. And, regardless of your age and excellent work contributed to the company.

Assuming a worst case scenario, let us examine the actions that you can take to financially survive a sudden layoff:

First and foremost, you need to assess that in the absence of salary income, how much liquid savings do you have to fund your living expenses.

Liquid money: List down all your options of liquid money. These include cash in savings bank account, fixed deposits, recurring deposits, debt mutual fund, equity mutual fund, equity shares, etc. Also, include your severance pay in this and any leave encashment, EPF or gratuity which you are entitled to at the time of leaving the organisation. First you utilise your bank savings, fixed, recurring deposits, debt mutual funds. If possible, try to retain your equity investments and provident fund. If you are facing a severe liquidity problem, then cash them out.

Plan bare minimum budget: Most likely, your current budget includes your needs (housing and food), wants (travel, shopping, dinner and hobbies), savings & investment, and debt. But now post the layoff, you will have to resort to a bare minimum budget. This will focus only on your needs – housing EMI and food, important bills to pay and children’s education fees.

During the lull period of no fresh income, any unfortunate event can mean a big financial blow to you and your family. Hence, continue with your life and health insurance cover and pay the premiums on time.

You can consider stopping all your investments happening on a monthly basis to unlock some cash inflow. These can be renewed again later when you start a new job and your cash flows get back on track. Also, assess where you can cut down on expenses like transportation, internet & mobile plan, etc. If you have any credit card debt, try to repay the same out of your savings. You don’t need any expensive and unnecessary debt burden eating away into it.

Once you get an idea about the time you can survive on your savings, you can initiate the following:

Evaluate your work options: If you think your savings will not last longer, even 6 months, you can take up any part time work to supplement your income. It could be any freelance job, tuitions, etc. to earn extra money to support your living expenses. You can even contemplate to settle down for a full time, temporary low paying job. On the other hand, if you can sail through smoothly for a while, then you can wait until you get the right job, suitable and relevant to your field.

Start networking: Reach out to everyone you can – recruiters, friends, old colleagues and let them know you are looking for a new opportunity. You have time on your hands, so keep attending networking events in your industry and joining professional groups where people can help you out. Networking will also enlighten you about the kind of jobs that are in demand. Rebuild you resume and make it interesting by highlighting your strengths and proving your facts and achievements.

To conclude, losing a job can be a panicky situation as money worries are constantly weighing on the mind. It is very imperative at that point to not make any hasty or impulsive decisions out of financial desperation. Sticking to a bare minimum budget and judiciously using your savings can pull you through the lean periods. Do not hesitate to seek financial help if required from your near and dear ones in a tight liquidity situation. You can also seek financial guidance from a professional financial advisor who would offer you a road map to wisely weather the tough financial times.

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