India’s economic growth has slowed down as the gross domestic product (GDP) for the quarter ending June grew at 5 per cent, lowest in six years. Several sectors are facing the heat of the downturn. Sales in the automobile sector are hit badly and companies have resorted to production as well as job cuts. Even companies in the fast moving consumer goods (FMCG) sector – considered resilient – have signalled job cuts.
Job loss is part of the economic cycle whenever the economy faces downturn. Suddenly, losing a job can be a big financial setback, especially when you have equated monthly instalments (EMIs) to pay, kids going to school and dependents to be taken care of. Things are tougher for couples with single income. It can happen to anybody. Therefore, it’s better to prepare yourself emotionally and financially for any eventuality. Once you are prepared for the worst you can always hope for better. Let’s look at the ways in which you can prepare yourself against a sudden job loss.
Create an emergency fund
The foremost thing to do is to create an emergency fund that you can fall back upon in case your monthly salary stops coming. Finding a job takes time and becomes all the more difficult when the situation is grim in the particular sector. Therefore, it’s better to create a reserve equivalent to at least six months of monthly expenses. An emergency reserve can be built slowly and one shouldn’t stop monthly investment in order to create it. If possible cut down some of your discretionary spends every month, start an SIP for the same to create an emergency fund. You can also use bonuses or any extra income you earn in order to create your emergency fund. The money kept in emergency fund should be liquid.
Buy an insurance cover
Many people rely on the health insurance cover provided by the employer to take care of the medical expenses. But it is good to have an insurance cover of your own in case you are not employed or in between jobs, you will be ready to face medical exigencies. Also, there are job loss insurance cover available as an add-on cover with plans such as critical illness and home loan protection. These plans generally take care of three EMIs in case of a job loss. However, job loss add-on covers are generally expensive and have exclusions. So, read the fine print carefully before buying. If you have already bought one with your home loan (as it is generally pushed with the loan) then don’t depend on it completely.
Cut down on discretionary spending
Make a monthly budget if you haven’t made any. Review it to cut down on expenses which are avoidable. “First define needs and wants. Cut down wants and ensure that money is available for future needs. Eating out and commute are the two biggest expenses other than rent. Some of these like eating out can be cut down. Commute can be changed to car pool etc to cut costs,” says Shweta Jain, Founder, Investography.
Build good Professional Network
If you are well connected in your industry, it would be easier to find a job. It is important to be in touch with people in the industry even when you are not looking for a job change. “In these days of online social connectivity, people are getting more approachable through networks such as LinkedIn. Create your LinkedIn profile and start networking with professionals from your industry. With the ease and accessibility of the internet, it has become easier than ever to connect with people relevant to your job industry. Also join communities related to your industry, visit events, seminar and network with people. Try to make your presence felt. Therefore, by building a strong enough online professional network and attaining different networking events you will be better able to hunt for newer opportunities,” says Tarun Birani, Founder and CEO, TBNG Capital Advisors.
Upgrade and diversify your skill
Technology is quickly changing the way people work in different industries. Therefore, it is always better to upgrade yourself with new skills not only to excel at your job but also to ensure if you face a situation like job loss, it is easier for you to find a new one with updated skills. Keep changing your work profile in order to diversify your skills. “Try developing new skills as they will help in opening newer job opportunities for you. An investment in developing new skills right now can benefit your entire career in the future,” says Birani.
Try getting freelance work
“Thanks to increased competition in the job market, these days we live in something called the ‘gig economy’. Younger generation is constantly looking at one-off contracts or opportunities that can allow them to do a job they are good at – such as photoshop designing, video editing, content writing & so on. While such freelancing work is no substitute for a stable job, it is a good option in cases when you don’t have a job at all. A side benefit of freelancing is that you can choose to do the work you like and seek specific opportunities while you earn some money while doing it in the absence of a stable income,” says Tarun.
In the end, mentally prepare yourself for the situation. Panic will not help you at all. Plan ahead and remember job loss is not the end of the world.