Not Scared, but Prepared!

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The Global crisis of 2008, which hit the world by way of large scale dismissals of millions of employees worldwide along with financial bankruptcy of the most reputed and popular investment banking companies, sent shivers down the spine of all the employees. Since then job security has always been under constant threat.

 


No matter how high up the corporate ladder an employee may stand, they must be prepared for unfortunate turn of events which may lead them to lose their jobs.


If one’s finances are in order, they will be better prepared to avoid being plunged into insurmountable debt crunches post job loss and neither will they be compelled to accept jobs beyond their areas of interest. ‘One should always be prepared and not paranoid.’


Some ways to ensure a financially safe redundancy period are the following:-


Predetermine Expense Statement: Enter transactional records of your daily expenses till the time you are able to identify your spending trend. This will give you a clear idea as to where unnecessary expenses can be altered and spending can be prioritized. In an event of job loss, you will be well aware of your spending patterns.


Determine financial position: One must know where the stand financially at any point of the time in the year hence individual financial situations should be reviewed before the need arises. Many people are hesitant in categorizing their assets and liabilities in anticipation of unfavorable outcomes, others rely on their ‘gut feeling’ of their financial position, however ignorance in such forms may lead to an eternal debt trap or extreme financial crisis. Hence preparation of your net worth statement is of prime importance.


Know your Employer’s Job Severance Policy: Acquaint yourself with your employer’s severance policy. One must find out if severance is paid to the laid off employees. Knowing how much you can expect from the policy can help calculate the emergency fund requirement.


Create a Contingency fund: After knowing about the severance policy one must start preparing for a contingency or emergency fund which will cover a minimum period of three to six months of expenses. This fund will help you in stretching your idle period without worrying about funding requirement and this will also prevent you from using the money that you have saved for retirement.


Managing outstanding balances: If you have pending balances on your credit card you must instantly talk to your credit card company and inform them of a future possibility of a job loss and request a payment plan and other payment alternatives. Most credit card companies are willing to work with you if you take the initiative.

 

Apply for unemployment insurance: Taking up an unemployment insurance policy is a smart decision which secures your lifestyle during redundancy periods. One such popular policy is the ICICI Lombard unemployment policy (India) in which payment of equated monthly installments in the event of a layoff is present as a compulsory rider which means that the entire insured amount is paid, if the insurer accepts the claim.


Update your resume: In case you are suddenly laid off, your resume must be updated with the latest qualifications and skills acquired during the previous job experience and what qualities you earned from them.

 

Develop and nurture your networks: It is said that the best jobs are gained as a result of word of mouth arising due to networking in the corporate field. Networking offers another avenue to reach out to vendors, customers and future business partners and allows one to sell their individual perspectives, much more than what a resume can.


Thus having a clear future path chalked out in case of uncertainties like job loss is pivotal for a smooth transition and coping period.

 

This article has been written by Vedika Khemka.
Fpguru.com in its efforts to spread financial enlightenment organises financial planning article-writing competitions in colleges. Vedika was the 1st Runner-up in the competition held for the BBA program of NMIMS University ASM School of Commerce. We thank the Management & Dean of NMIMS  for their support.

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