Build an Emergency Fund

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When new jobs are hard to come by and a lot of companies are retrenching employees, everyone must plan for the eventuality well in advance so as to avoid panic at the last moment and the resulting inability to survive the layoff. Below are a few steps you can take in advance and a few others after you have lost your job.

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Build an emergency corpus: Whether the spectre of a lay-off is looming or not, make sure you have a contingency corpus equal to six months' expenses at your disposal. If you suspect that the job market is shaky, shore up another six months of loan EMIs.

Get an independent health insurance: It's another step you need to take before you lose your job. Don't be secure in the knowledge that your company is providing group health cover to you and your family. If you suddenly find yourself jobless and you or any family member faces a medical emergency before you land another job, you will have to pay from your pocket and may not have sufficient resources to cover the expenses.

Slash expenses and form a new budget: This is the first step you need to take if you get the pink slip. Depending on your savings and fund availability, you will have to re-frame the household budget. Make sure you give priority to fixed expenses like insurance premium, loan EMIs, investments and utility expenses, and slash discretionary expenses drastically. You can also assign the settlement money from your previous job for fixed or household expenses.

Sell assets, take loan against investments, borrow from family: If you don't have an emergency corpus, dip into your bank savings. If it's insufficient, sell some of your assets or redeem investments like mutual fund units. You could also take a loan against assets such as fixed deposit, PPF, insurance, gold or property. The interest rate is not as high as that of a personal loan and you retain your assets. Do not, however, dip into your retirement savings and avoid taking personal loans or maximising your credit cards, which come with a high interest rate.

Reschedule loan EMIs and insurance premium, stop investments: Among the most difficult financial obligations to fulfil if you don't have a regular income are loan EMIs, insurance premium and investment instalments like mutual fund SIPs. If the finances are too constrained, stop your investments temporarily. Since the insurance premium cannot be avoided for fear of the policy lapsing, find out from the insurer if you can alter the periodicity of payment or reduce the cover amount temporarily. As for home or vehicle loans, you can request your bank for a temporary EMI holiday till you get a new job, or reduction of the EMI amount by increasing the loan tenure. Besides, consider the option of loan protection plans, which cover your loan against emergencies such as these.

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