Strategies To Manage Money Post Layoff

Avoid dipping into emergency corpus as it might lead to a debt trap in no time

Plunging global economies into their deepest crisis since the Great Depression, the COVID-19 pandemic has taken a considerable toll on people’s livelihood. As per data released by the Centre for Monitoring Indian Economy (CMIE), the number of salaried people who have lost their job due to pandemic from April to August 2020, stood at a staggering 21 million.

With dwindling revenues threatening the viability of many companies, many either have laid off a chunk of their workforce or are in the process of doing so. If you have been pink-slipped, it becomes even more essential for you to adopt prudent money management strategies until you bag your next job and get your finances in order. 

Let’s dig deep into some strategies that can help you sail through during the layoff period.

Minimise expenses and stick to a budget

This period calls for keeping a tight lid on expenses and keeping discretionary ones on the backburner. To put it otherwise, spend only on needs and forgo your wants. You need to change lifestyle habits and weed out binge spending.

During the layoff period, every penny matters, and hence, it’s crucial to formulate a budget and stick to it. Avoid spending on luxury items and most importantly, track your spending. Today, there are many apps available for you to formulate a budget that covers your essential needs.

Avoid new loans

Availing a loan with no active income is a recipe for disaster. With people losing jobs, the market is flooded with several loan offerings that you can avail of with a few clicks. However, note that these loans carry an extremely high rate of interest, repaying which can pose a considerable challenge.  

Also, faltering on EMIs can severely dent your credit score affecting your creditworthiness for future loans, should the need arise. The RBI had offered a moratorium period for six months, ending in August, keeping in view of financial constraints due to the pandemic. If you have availed of the moratorium offer, note that your interest outgo will be quite high.

Liquidate some of your investments to repay existing loans and avoid taking any further debt that can destroy your finances beyond repair. If you are unable to pay, talk to your lender to find a way out.

Postpone big-ticket purchases

Discretionary expenses are a big no when there is no inflow of active income. The upcoming festive season will see many discounts and lucrative deals on offer. However, it’s in your best interest to avoid them as far as possible.

Instant gratification is one of the major culprits behind reckless spending, which can be disastrous, particularly during these times. Avoid dipping into your emergency corpus to buy things that you can do without, as doing so can lead to a debt trap in no time.

Re-evaluate your investment portfolio

This is another crucial aspect of money management, more so when you don’t have a job. Find out if you can pause some of your investments and utilise the money for addressing day-to-day needs. For instance, most mutual fund houses offer the pause facility for systematic investment plans, ranging from one to three months.

Using this option will help you continue with your mutual fund investments without redeeming and losing out on the gains. Also, rebalance your overall portfolio in a manner that can help you sail through choppy waters with ease. Avoid instruments that you don’t understand and seek help from a professional if required.

Bank on your emergency fund and use it judiciously

The fundamental objective of an emergency fund is to bail you out during a contingency. Bank on it and make sure to use it judiciously. Don’t squander the fund to address wants and replenish it once you are back into your job.

Don’t use all your funds at once. For example, if you have liquidated a fixed deposit, don’t rush to redeem your mutual funds simultaneously. Keep options open and stretch your emergency corpus as far as possible while dealing with the crisis.

In Conclusion

While these strategies can alleviate financial stress to a great extent, make sure to circulate your resume among peers and connect with potential recruiters. Also, use the time to upskill yourself, bringing more value to your next organisation. 

The author is Head - Edelweiss Wealth Management