Lost your job? Here's how to manage finances

Technology jobs are not safe anymore with top Indian companies expected to layoff about 50,000-60,000 employees. Pink-slips are literally flying thick and fast. Personal finance experts give DNA Money the survival check-list in case of job loss.

Be real: While it’s good to be optimistic, with the IT services industry’s current situation, it may take longer than just a few weeks to get another job. Hence, it’s important to take some time to strategise your finances. Pick up every dime from your employer that is due. If you have spent five years, don’t forget the gratuity fund. “Move on from the emotional shock of losing your job. It happens. The first thing you should do is to realistically assess your situation. Figure out exactly what income your family has. Then, compare expenses. Mortgage or rent, monthly loan payments, grocery bill, utilities everything has a number. Make a list of assets and liabilities,” says Randeep Sharma, a financial consultant.

Rejig loan terms: If you have credit and personal loans, try to repay soon. Credit card debt is costlier, often extracting 30-42% interest per year. Use the full and final settlement amount to settle such debts. Personal loans also come with 14-20% interest, so they are second in priority. Do check for repayment charges for personal loans, because some impose penalty for pre-payment. “For your home loan and car loan, talk to your banker. In case you have previously not missed EMI payments, they may give you a moratorium. Try to increase loan tenures and reduce EMIs if you cannot afford to pay the current amounts. Also, remember to discontinue direct debit of expenses/bills from your savings account. This will give your more flexibility if you want to pay EMIs first,” advises Shrideep Dutt, who works in a private sector bank.

Smart use of emergency fund: Savings could be in the form of bank fixed deposits (FDs), investments in stocks and mutual funds (MFs), even gold if you are old fashioned. The emergency fund is built to help you when you are in dire straits. “Most families save for three-four months which gives enough time to get a new job. When you look at expenses, prune every single unnecessary spend. For instance, junk premium communication plans for mobiles if you have broadband. Use a basic plan. Avoid eating out. Even investments plans need to be halted,” recalls Rik Basu, who lost his job in 2009-11 period.   

Retain health and life insurance: No matter how hard-pressed you are for money, you cannot cut out premiums for health and life insurance. In case you have dependents, you must have a life cover. Also, once you are out of job, your employer’s fancy health cover will not protect you. If these insurance payments are close to renewal, use the grace-period to delay outgo. “But under no circumstances will you stop these covers. Big out-of-pocket healthcare expenses can destroy your finances,” advises Shruti Bhatt, a financial advisor.  

Work part-time: Investing in learning a new skill may look easier, but its not. Getting a small job where you get paid for part-time work is a better option. Any form of income is welcome. With the tech industry going through a painful phase, the next job may not happen soon. “As long as you earn something, its okay. Be careful about investing ‘savings’ to learn new skills or starting a business. These are not easy tasks, especially if you have no backing,” adds Randeep Sharma. If you plan smartly, chances are high you'll pull through a period of full-time unemployment relatively unscathed.

TAKE HEART

• Once you are out of job, your employer’s fancy health cover will not protect you
   
• Use the full and final settlement amount to settle credit or personal loans