Budgeting | Personal Finance | Article
Suddenly Jobless: Are You Prepared If You Lose Your Job Tomorrow?
by Cherry | 14 Sep 2023 | 4 mins read
Have you ever thought about what you would do if you lose your job today? In uncertain times, the potential for job loss is very real, and it’s something that can happen to anyone at any time.
While you can’t control what happens in the job market, you can control how you prepare for it. Being prepared helps you reduce the impact of income loss, manage your emotions, and you’ll be better placed to bounce back faster.
Here are some steps you can take now to get yourself ready in case of unexpected termination.
1. Understand your current financial situation
The first step to job loss preparedness is to know where you stand financially. This means taking a good look at your spending habits, debts, and savings.
What you are spending on?
Track your expenses for a month or two and categorise them into essential and non-essential.
Essential expenses are those that you need to survive, such as food, rent, utilities, transportation, and health care.
Non-essential expenses are those that you can live without, such as entertainment, dining out, subscriptions, or travel.
How much do you owe?
List out all the loans and credit cards that you have and their interest rates, minimum payments, and balances. This will help you prioritise which debts to pay off first and how much you can afford to pay each month.
How much savings do you have?
Check how much money you have in your bank accounts, retirement accounts, or other investments. You’ll then be able to figure out how long you can survive without income and how much more you need to save to be comfortable.
Once you have assessed your financial situation, you can then plan, adjust and trim your budget accordingly. Try to cut on any non-essential expenses and focus on paying off high-interest debts as soon as possible. You can also look for ways to increase your income by selling unwanted or preloved items and doing side gigs.
2. Prepare for the worst
After your financial health check comes your to-do list of items that will help cushion the impact of losing your job.
This means having spare money that can cover your expenses or at least three to six months. This helps you avoid going into debt or dipping into your retirement savings when you lose your regular income.
Don’t forget to check regularly if you have put aside enough money as the cost of living is constantly on the rise, which means your monthly expenses may have increased over time.
Debt repayment postponement
Talk to your banks to understand what options are available for your upcoming loan and credit payments if you get dismissed.
Some banks may offer payment deferments, or hardship programmes that can lower or pause your payments for a period. You could also negotiate a lower interest rate, a longer repayment term, or a settlement amount. Just be sure to ask whether there are any fees and penalties you have to pay, as well as your credit score might be impacted.
Emergency Fund Calculator
Find out how much you need to have stashed away in your emergency fund for accidents, unanticipated expenses and possible loss of income.
3. Set up additional safety nets
Getting your safety nets ready can protect you from worst-case scenarios. Here are a few things to look at to help you get started:
Ensure you have medical protection
When you lose your job, it also means losing any employer-sponsored health insurance coverage that it came with. To avoid leaving yourself vulnerable to high medical costs, consider getting your own health insurance.
Know what part-time jobs are available
Having a part-time job can help tide you over until you find your next full-time job. It’s also a way to maintain your skills, network, and confidence.
Knowing the available options means that you can activate them when needed. Other than part-time roles, you can consider freelancing, consulting, or even starting your own business.
No better time to prepare than now
Losing your job can be a scary and difficult experience, but it doesn’t have to be the end of the world. You can’t control everything that happens in the job market, but you can control how you prepare for it.
Being prepared can make a big difference in softening the blow and helping you bounce back faster and stronger. Who knows, this might just be your opportunity to re-evaluate your career goals and find a new direction that better suits your needs and aspirations.