Meenal and Manish are young couple in their early 30’s. They have many life aspirations for themselves and their family. Apart from good education for their only son Miraj, a nice self owned house, a car and international vacation once in two years are main financial goals they are aiming at. In Dec 2019, they have made their house dream come true. Obvisouly, they have to take a housing loan but being double income family EMI is not an issue they thought. 

When we feel things are smooth and our Plan A is working fine, often a twist surfaces. Since March 2020, entire World is struggling with Coronavirus Pandemic and we are all in locked down complete or partial. In these testing times with the ongoing pandemic and global economic crunch, millions of people are facing the stark truth of job loss or salary cut. Almost all businesses around the world are impacted and it’s only natural this would translate in their balance sheet. The first measure companies would take is to cut cost and going by history, human resource is always the most dispensable. 

So was the case with Meenal. One fine day she got a call from her Human Resource department breaking the news to her about retrenchment. Though she would be getting two months salary, what next is a big question. In these trying times, getting another job can be a real struggle. Household monthly expenses, children education expenses and EMIs have to be paid for which is difficult to manage with Manish’s salary alone.

This scenario is becoming more common than we envisaged. So, what can we do if we are faced with such  situation? How can we prepare for the troublesome times ahead? Let’s discuss all these questions in this post. 

• Mentally Prepare Yourself 

The first thing you must do is accept the situation. Don’t be in denial. Denial leads to blame, guilt and hurt ones self esteem. Acceptance leads us to new beginning.

Although you might not have lost your job, it best to be ready for any surprises. As the saying goes, “Think of the best and prepare for the worst.” Accept the likelihood that you may lose your job or face salary cut and be mentally prepared for it. Once you accept it, half the battle is won. Take an inventory of your financials. Your Assets and liabilities. You can then proceed to safeguard your interests as your mind will be clearer. Remember if we are positive in our approach, more opportunities will knock on the door.

• Control Expenditure  – Need Vs Want Struggle

You must be in habit of noting your expenses. If not, please start today. This data helps you to categorise your spending in two important categories – Needs and Wants. Paying bills, buying groceries, medicines, paying for insurances and EMIs are your needs. Check for some lifestyle expenses like dining out, movies, online purchases (non essentials). You must immediately stop any lavish spending. Instead of a dinner out, try to cook something healthy at home. In fact, keep a track of your spending and limit everything to only the essentials. Even when you have strong financial planning to fall back on, you should not spend needlessly as you do not know how long this situation will last and how long you will have to do without a paycheck. 

• Maintain An Emergency Fund

The next step is to create an emergency fund for ofcourse emergencies. You should only tap into this fund when you deem the situation an emergency. How much should be your emergency fund? We recommend it should be equivalent to your 4 to 6 months of essential expenditure. In absence of such emergency fund, under stressful financial situation irrational and emotional money actions are taken like breaking good interest rate FDs, selling Gold ornaments,  taking loans on PPF, EPF. This only leads to more financial chaos. Emergency fund can protect your other savings and investments and help you take more rational decisions in times of financial crisis.

• Understand your Severance Package

You should know your gains from the situation or what you receive as a severance package. Take note of the unused leaves, transfer of insurance, and other things. Different companies have different rules about the severance package, but regardless it’s a good sum that will help you in your struggle for a long time. So, ensure everything is in order. Check how your Employee Provident Fund will be handled depending on whether you want to transfer it to next company or withdraw it.

• Get an Independent Health Insurance

We cannot stress more on this part of financial security. Regardless of whether or not your current employer provides health insurance, it is essential that you own separate health insurance for yourself and the family. 

In case of  job loss or job change or may be because of change in existing  company’s policy change, you may face a situation where you and your family is without health cover.  A health emergency in this situation can be reckoning not just mentally but financially. Hence, ensure that you have good health insurance covering every member of family sufficiently.

• Plan and be ready for the Future

Finally, you should be optimistic and look for better opportunities. Even in this crisis, there are companies that are hiring. Companies that have not been critically impacted. You should identify the industries that have had minimal impact from the current situations and start segregating prospects, but don’t jump the gun and apply until you know you do not have your job anymore. Use this time for upskilling. The new Normal is going to demand new skills. Some jobs may get extinguished and many more will be newly created. Do a good research on such job dynamics in your work area and be better prepared by learning and upgrading.

If you are experiencing salary cuts, embrace the situation and understand there are others who have it worst. In such a situation, try to supplement your income. You could do independent consulting and who knows your side hustle could turn into your full-time income. If you have a business idea, it might be time to give it some thought.

So, friends, let’s be vigilant, proactive and positive towards our financial journey and stay financially secure in the current situation.