ATM :: Tips to manage finances if you lose your job


By Bindisha Sarang | 3 Nov, 2014, 08.00AM IST | Economic Times
ATM
More than 5000 people will lose their jobs when Nokia shuts down its manufacturing unit in Chennai, this month.

While job security cannot be guaranteed today, a skilled or experienced worker can find another one before long. However, the interim period can be difficult if one does not plan one’s finances well.

“Having an emergency fund that can take care of at least three to six months’ expenses can be of enormous help,” says Suresh Sadagopan, a Mumbai-based certified financial planner. If you have an emergency fund, you won’t have to worry about money matters and can focus on hunting for a new job. However, if you don’t, what should you do? The following steps can help you manage your household till you find a new job.

Plan a new budget

Drafting a new budget is the first step and it entails cutting down the lifestyle expenses. A monthly budget has two components: fixed expenses such as rent, and variable expenses. The former include compulsory expenses, such as groceries, electricity bills, mobile bills and other utilities that you cannot avoid, whereas the lifestyle expenses would be weekend movies at multiplexes or restaurant dinners. “The first expenses to let go off during the unemployment period are these discretionary expenses,” says Kiran Telang, a financial planner.

Take independent health insurance

It is likely that your employer offered you and your family a medical cover. However, when you lose your job, you let go of the health insurance as well. This is the reason that most financial planners insist on employees buying an independent cover besides the group cover from the employer.

Medical emergencies can happen any time and paying medical bills while out of job can be excruciating. “Getting health insurance is of paramount importance. The cover should be at least `5 lakh,” says Sadagopan. Financial advisers suggest that you buy a separate family floater policy. The average premium for a family of four is usually around `12,000 per annum. You can port your group health insurance policy to individual health insurance by the same insurer. Check with your former employer’s insurer if this is possible.

“If your life or medical insurance premiums are due during the unemployment period, you must service them, even if it’s difficult to do so,” adds Telang.

Prioritise debt repayment

Most households have debts, such as a home loan, personal loan, and credit card bills. Make sure that you pay your EMIs, especially for the home loan. If you are finding it difficult to pay the instalment, request your lender to restructure the debt.

You can also ask for deferment of loan payment. If you have been a good borrower, chances are that the lender will oblige. Switching the loan to another lender who offers lower interest rate on the loan is also an option you can explore.

Credit card debt can prove very expensive if ignored, so pay at least the minimum amount due. You can also apply for a balance transfer to another bank’s credit card, which will reduce the minimum due amount. “If you have skill sets that can enable you to get a job within 3-4 months, you don’t need to aggressively look into restructuring debts. But if you are working in a lull sector and the overall job market is not looking good, it makes sense to restructure debts as soon as possible,” says Telang.

Tap into your portfolio

Even as you look for a job, you will need to tap into your investments. “Check your portfolio and take funds keeping your asset allocation in mind,” says Sadagopan. For instance, if you have a higher asset allocation in equities, you could sell a portion to meet your immediate needs and, in the process, balance your portfolio.

WAYS TO TACKLE LOAN INSTALLMENTS

Reschedule

The lender will increase the tenure of your loan, reducing the EMI.

Restructure

You will have to convince your lender to give you a better deal in terms of interest rates.

Deferment

Inform your lender that you won’t be able to pay the EMIs for some time, but assure repayment after the said period.

Switch

Switch the loan to a lender who offers a lower interest rate.

Source : http://goo.gl/OQ3nFq

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