Don't Wait For It, Here's How To Be Financially Prepared Amid Mass Layoff Wave
Microsoft, Meta, Dell, HP and Google. These are some of the biggest companies that have recently announced mass layoffs. And the list of companies seems to be growing with each passing day. Lakhs of employees around the world have been hit by these job cuts already amid economic uncertainty and rising recession fears.
How To Be Financially Prepared Amid Layoffs
But luckily, if you are among those who haven't been laid off yet, wouldn’t it be wise to take this as an opportunity to check if your finances are ready in case the bad news comes by someday?
Instead of sitting idle and waiting with the fear of getting that unfortunate call/email, here are some of the vital financial checkpoints you must clear to ensure that you are financially prepared if a financial emergency such as a sudden job loss arrives.
Have an emergency fund to fall back on
The income disruptions caused by the sudden layoffs have re-emphasized the absolute importance of having an adequate emergency fund in place. So, if you are lucky enough to not have been laid off yet, it's time to strengthen your finances amid the layoff wave by creating an adequate emergency fund if you don’t have one yet.
This emergency fund will act as your financial cushion to fall back on if you suddenly face a financial emergency such as job loss. This fund will help cater to your monthly recurring and mandatory expenses.
Ideally, an amount equal to at least six times your recurring monthly mandatory expenses is a must to be kept in an emergency fund, also called a rainy day or contingency fund. Remember that it would be even better to have an even bigger emergency fund equal to expenses of 9-12 months. Your mandatory and recurring monthly expenses such as rent, utility bills, insurance premiums, children’s education fees, loan EMIs etc. should be included in this emergency fund so that in case your income gets disrupted due to layoffs, this fund can take care of such expenses for at least six months.
Have a part of your portfolio invested in liquid instruments
As these are relatively less liquid investment options which often result in you falling short of liquid money/cash when needed, isn't it wise to shift, or at least have a part of your investment portfolio kept in highly liquid instruments, like savings accounts with high-interest rates (like small finance banks and some private sector banks) and liquid funds (a category of debt mutual funds)?
So, during the mass layoff wave, take this time as an opportunity to relook at your investments and have some of your money kept in liquid instruments. This would help you turn them into cash/transfer to your bank account quickly whenever needed, thus giving you much-needed liquidity in adverse financial scenarios like layoffs.
Or else, if you still choose to let your investments remain entirely invested in low liquidity investments such as PPF (which has a 15-year lock-in period), tax saving FDs (five-year lock-in period), real estate (can usually take some weeks or months to find the right deal), etc., you are likely to fall short of liquid money to fall back on when the need arises, which may further push you to borrow from friends, family or banks.
Also, having your investments spread across different asset classes helps to diversify your investment portfolio, which helps to balance the risk-reward ratio of the portfolio. Try having your investments spread across different asset classes such as gold, savings account, liquid funds, real estate, equities, etc.
During economic uncertainties, if you have a diversified portfolio, the overall risk of your investment portfolio gets reduced, thus minimizing the chances of sitting deep in losses which would otherwise have occurred if you would have invested heavily in a single asset class which ended up getting hurt during the economic ups and downs.
Be aware of ways to manage ongoing EMIs
In case you have existing EMIs to pay for loans such as car loans, personal loans, home loans or any other loans, it’s important to be aware of the possible ways to manage these loan EMIs in case you get laid off.
Yes having an adequate emergency fund in place will indeed act as a cushion, but it would be wiser to also take note of other ways to manage your ongoing loan EMIs.
These include requesting your lender for loan tenure extension (as this will reduce loan EMI amount), asking for a grace period if available, and redeeming your low-yield investments such as bank FDs, debt funds etc to repay the EMIs (as the interest rate on EMI is likely to be higher than the rate of returns on these low yield investment options).
You can read in detail about these ways by clicking here.
Cut down on unnecessary expenditures & budget
Call it our casual nature or just laid-back attitude, but many of us tend to take our income, whether salaried or self-employed, for granted. And these ongoing mass layoffs have been no less than a reminder to never take your income for granted.
And even if you had been doing that till now, it's time to stop. Take these mass layoffs as a reminder to cut down on unnecessary expenses or indulgences and instead save, or even better, invest that money.
No matter how small those expenses may be, such as weekly movie outings, ordering outside food frequently or monthly expensive dinners. Try removing or trimming down on these expenses, which will in turn reduce your monthly budget too.
Also try to postpone any big-ticket expenses which aren't absolutely urgent, such as a big TV set, car, expensive mobile phone etc.
After all, money saved is money earned, right?
Buy a health insurance policy right away
While health insurance should anyways be a priority and not merely a choice, the casual attitude of many people is what often makes them laid back towards this necessity. But, as they say, better late than never. So make use of the mass layoffs as a wake-up call to buy health insurance, if you haven't, and hence provide a safety net for yourself and your family to tackle skyrocketing medical costs.
In the absence of health insurance, if you or your family members happen to, unfortunately, incur high medical costs due to a medical emergency, then the entire burden of the hospital bill will fall on your pocket, and that would be even worse if you have been, or may get laid off at that time.
So if you have been lucky enough to not get laid off yet, ensure to buy a health insurance policy for yourself and your loved ones right away.
Also, if you have been solely dependent on your employer's health insurance, you must remember that it will lapse once you are no longer associated as an employee with the company. So, in all ways, it's absolutely necessary to have health insurance in place, so that the share of medical bills can be shared with the insurance company, thus preventing you from draining your lifelong savings.
Also Read: 5 Tips To Buy Health Insurance For Parents
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