Save more, spend less to beat layoff blues

Downturn and bad job market have become the order of the day. But a job loss will sting you a lot less if your finances are in order, says Preeti Kulkarni

 WITH the global meltdown continuing its pursuit for new victims, the average Indian is slowly coming to terms with the possibility of a job cut. Over the past couple of days, airline majors Air India and Jet Airways have expressed their intentions to prune human resource costs and many fear this could be just a prelude to a larger crisis that could engulf several jobs in the coming days. It is time for those facing the axe to tighten their pursestrings and take some tough decisions on their investments and loans.
    Meeting regular expenses
    The first source that you need to tap during such situations should be your contingency fund. "If you have been a prudent investor till now, you would have set aside a kitty capable of meeting at least four months' expenses," says Amar Pandit, director, My Financial Advisor. If you haven't built such a corpus, you should not lose time in creating one out of the compensation/ severance package given to you by your employer.
    Liquidity is key
    The remaining amount can be invested in safe avenues like bank and post office deposits. FDs may not be tax-efficient, but that should be least of your worries at the moment considering that without any income, you would be falling in the lowest tax bracket. Says financial planner Gaurav Mashruwala: "In the absence of an income stream, you should look at directing a part of your compensation package/savings towards regular income-generating instruments like post office schemes." If you find yourself in a desperate situation, you can even consider disposing of your growth-oriented investments and invest the proceeds in such risk-free regular income schemes. If the proceeds realised are not sufficient, gold assets can be liquidated next, followed by property; withdrawing money from your provident fund should the last resort, he adds.
    Go for loan servicing
    Next on your agenda should be ensuring that you are not branded as a defaulter on your existing loans. If your cash crunch is likely to force you to skip a couple of EMIs, you need to initiate a dialogue with your bank, explain your situation and buy some time for making repayments. "Loss of a job is a valid ground on which one can approach the banks and make a request for some relaxation in the EMI schedule. Such borrowers should try and convince the banks of their genuine intent to resume EMI payments after securing a new job," advises VN Kulkarni, head of the Bank of India-backed Abhay Credit Counselling Centre.
    Don't ignore health insurance
    While managing regular income, liquidity and loan-servicing would rank amongst topmost concerns, you shouldn't ignore another critical aspect — health insurance. If you do not have a standalone health policy, but have been banking on the group health insurance policy taken by your employer instead, it's time to buy one immediately, as the group policy might cease to exist the day your employment contract ends. "No matter how tight your financial position is, health cover cannot be treated as an optional expense," says Mr Mashruwala. Though the only thing that can offer comfort to someone faced with a lay-off is another job offer, the measures suggested here will help you sustain your spirits till that happens.
    preeti.kulkarni@timesgroup.com