Financial Planning For Losing a Job


The first important thing is to plan which is a proactive step

It is always wise to reduce the burden of loans even when employed

Losing a job can be one of the most fearsome experiences especially for people who have not planned for such an event. The whole idea of losing a job and being left without a source of income can be very disturbing but when this really happens, the first thing to do is to avoid panicking. Never, ever in any emergency has panicking helped.

Two things are a must for anyone who even remotely has any chances of facing a job loss. The first important thing is to plan which is a proactive step that every individual should take; and the second thing is to keep a calm head ALWAYS.

If a job loss does happen, then the person should focus on taking the time off and planning for getting an even better job rather than lamenting. One of the most common mistakes that people do when they lose jobs is to make hasty financial decisions which more often than not, land these people in even worse conditions. Immediately liquidating assets and investments are likely to have a very dangerous impact.

So, now the question is, what does one do about their finances in such dire consequences? How can a person plan his finances properly, to see him through the tough times?

Let us find it out below.

Planning out investments while employed

Upon losing a job one has the opportunity and should reassess his or her career and if needed, take decisions that can even be a complete change in the career option. The next most important thing that people who have a chance of losing jobs must keep in mind is making proper investment decisions when they are in the job. Although many people are lucky enough not to lose job and have a comfortable life, the investment decisions made while staying in the job can make a lot of difference in case the loss of job happens.

The primary planning for saving for a job loss needs to be made for at least six months. In general upon losing a job a person generally can get a job back within the next six months so planning the expenses that is incurred each month and making an emergency fund for six months in advance is the first step that the person needs to take.

Among the most important investments that needs to be made is having a proper health insurance as this will help cover for any ailment that may happen. Without a fixed source of income it is extremely tough in today’s world to cover the expenses for any potential ailment.

It is always wise to reduce the burden of loans even when employed and in case one is facing the prospect of losing the job it is important to keep loans at the basic minimum and selling of items which increase the debt is a wise thing to do. The emergency fund must have provisions for the EMIs that needs to be paid.

Another excellent option is to invest in SWP (Systematic Withdrawal Plan) while you’re still employed. You can derive your monthly expenses from the SWP mutual fund; withdraw a fixed or variable amount monthly, quarterly, annually as per your needs, and minimize the impact on your monthly expenses, till you find a new job or start something new.

But remember, you need to invest in an SWP by properly planning for it while you already have your regular job.

Investing in mutual funds

In current scenario Mutual Funds have become an excellent mode of savings for people and with the introduction of systematic investment plans things have become even easier for people to invest in Mutual Funds. For someone who is in a risky industry and there are chances of losing job, they should definitely make it a point to invest in mutual funds while the job is good and they are receiving regular paychecks.

Mutual funds are the perfect tools for investment in today’s world as it provides the long term wealth gains along with the simplicity of investing the money, lower cost, diversification of the funds and the added benefit of professional management of the funds. When a person is working in an industry where job loss is not uncommon then making the best possible investments keeping future in mind is essential. The jobs are generally very taxing on the mind and body.

People hardly get time to spend with their families, let alone find time for managing their own investments. Stocks do provide the best chances of making the most out of the funds that they set aside for investment but holding and managing stocks by oneself is almost a full time work.

Why mutual funds?

The simplicity of investing in mutual fund is also a great benefit and once the investment is done there are not much worries about it, frankly speaking mutual funds are very easy to understand and people who have very limited knowledge of financial investments can also easily grasp the basics of mutual funds in a very short period. The most important factor however is probably that the money invested in mutual funds are highly diversified.

Actually the money is not only diversified into various stocks but the money is also diversified in different stocks that belong to different industries. Not only stocks but mutual funds are also widely diversified because they are also invested in different asset classes like bonds and cash. The minimum investment required for mutual funds is quite low and with the advent of SIPs people can start buying mutual funds with regular investment of a very low amount every month.

Mutual funds are indeed a boon as an investment method for people among all financial groups but especially for people who work in industries where job losses are common. When they are in the job they should make it a point to invest in mutual funds as often as possible and probably the best option is to opt for SIPs. In this way the keep investing money in mutual funds which guarantee good returns and can become an important source of money for them in case they lose their job.

Final words

No matter how hard it seems, losing a job doesn’t really mean end of the world. With carefully thought-out financial moves and informed decisions, you can certainly turn around the game in your favour.

The key is to keep steady and keep moving!

That’s why Comparte Investment team asks do you have “Nivesh Ki Aadat”.

With this one can say “Mutual Fund Sahi hai”,  so let me do Nivesh / Enquire