Losing a job is an unfortunate event and it may push you into financial uncertainty. While it could be difficult to predict a layoff or avoid it, it’s advisable to remain prepared to face the financial challenges.
Beyond the emotional toll, the financial strain is often the most difficult to navigate. Proactively putting safeguards in place might reduce your financial burden and give you the confidence to find a new job.
Here are some practical steps you can take to fortify your financial security in case of a possible layoff:
1. Building An Emergency Fund
Building an emergency fund is crucial to navigating financial uncertainty arising from situations like a layoff. Experts often advise setting aside an amount that can cover your regular expenses for at least three to six months. It's even better if you can save six to twelve months’ expenses for difficult times. Combine your liquid assets, such as savings, investments, FDs and underperforming mutual funds, into easily accessible funds if you are beginning from zero. Financial advisors often suggest investing in secure and highly liquid instruments to build your emergency fund.
2. Cut Down Non-Essential Expenses
Examine your current spending and see where you can make short-term cuts. Limit travel, subscriptions and eating out—anything that does not interfere with daily survival. By cutting costs, you can now use that money for debt reduction or savings. If your income falls unexpectedly, it’s advisable to manage your monthly expenses on a lower budget.
3. Reduce Unnecessary Debt
If you lose your reliable source of income, high-interest loans and credit card debt could be overwhelming. Avoid taking on new debt unless it is absolutely required. It’s also advisable to clear these debts while you are still employed. This helps you feel less stressed about finances and improves your credit score even after a layoff.
4. Improve Credit Score
Having a healthy credit profile can help you get approvals for a new credit card or personal loan, which could be helpful during a layoff. Loans can also be secured at lower interest rates with a higher credit score, making borrowing more reasonable when times are hard.
5. Diversify Income
Income diversification is another useful strategy. Explore side gigs, freelancing, or even passive revenue sources like investments or rental income, whenever possible. Additional income sources can offer stability and reduce the financial impact of losing a job.
6. Upskill
Employees in the private sector need to upskill with the changing needs of various industries. For instance, C++ engineers in an IT company that focuses on Python may need to acquire new skills to improve their chances of finding employment. Another important aspect of a close-knit sector is networking and building professional relationships. This may open up opportunities for collaborations and mutual learning.
7. Review Your Insurance Coverage
Unemployment-related health crises can quickly deplete savings. You and your family can feel more at ease and avoid long-term debt by making sure you have enough health, life and disability insurance
While it is traumatic to lose a job, finding a new job or foraying into a new field is overwhelming too. However, if you treat it as a bump in the road, you will do fine. Stay calm, gather your strength and explore new opportunities.
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