How to make ends meet during job loss?

A wakeup call to all salaried individuals, nevertheless working harder and getting affluent pay checks, concerned about the job Security. 

Did you realize, over the years, there is a spike in your financial pay checks, yet you find it hard to run the family without a month's salary? Why do we find it hard to run the family without a pay check? Right from the stone age, humans had the ritual focus squarely on saving what was best for their future. In this sense, saving experts should live a comfortable life free of financial concerns. On the contrary, they worry more about the financial matters that threaten their livelihood.

 

Paychecks help you meet your daily expenses, but far more of your salary money is spent on paying EMIs (Debts owned due to property purchase, usage of credit cards, and so on). EMIs are a headache for the salaried population, which cannot be laughed off. Properties are not bought from our pockets but rather with loans the bank provides.  Working out of fear to pay off debts causes us to rarely work for passion or glory. Inflation, job losses keep haunting us over the uncertain future.

 

Are you the one who is helpless without a month salary?

When you are too dependent on your salary, you are trapped in a dog eat dog world, not having an amicable relationship with co-workers, using others as a stepping stone to reach your goal and being untrustworthy.

 

Without further ado, a simple solution for making ends meet in the absence of a pay check for a few months : Start to invest in an emergency fund—a non-investment fund, used solely for emergency purposes in the case of job loss or medical emergencies. 

 

Let me illustrate with an example. Bala is earning 1 lakh/month. Bala concerned over job security, decides to start an emergency fund (a new bank account dedicated solely for emergency). Each month, he invests some amount into the emergency account. Once the emergency fund accrues reaches the cap limit [Here, Bala threshold limit is 5 months of his salary (Salary * 5 months) (100000*5 = Rs.5 Lakhs) ], he stops investing further into the emergency fund. Bala owns a debt and pays an EMI of Rs.30000.  Imagine this, Bala loses his job after a certain period of time. Jobless Bala won't panic, as he can manage his living costs as well as pay his EMIs through his emergency fund. When looking for a new job, he maintains a positive attitude and takes his time to negotiate the best deal. However, imagine Bala without an emergency fund. He would be in a state of despair, desperate to get into a new company to avoid defaulting on the next EMI.

 

Can I expect my emergency fund to be a hedge against inflation?

The emergency fund is not going to earn you any good returns, but rather it will stay idle in the bank account. Your emergency fund won't fight against rising inflation. However, this is your only fund that could be used for emergency purposes because of its liquidity. Your properties, plots are non-liquid assets which can’t be used in emergency cases. Please, keep in mind that having an emergency account with five times your salary earns you a healthy and safe lifestyle.

 

Do you remember the childhood story about the ant and the grasshopper? Of course, you are blessed with a stratospheric memory. Ants store food for the rainy season to manage food scarcity during the rain. Grasshoppers have no worries about the food catastrophe during the rainy season. Instead, it enjoys the moment and fails to save its food. During rainy times, Grasshopper faces harsh rain effects.

 

In a similar manner, associate ants with you and rain effects with job loss. As an ant stores food in its nest, you save your money in an emergency fund.

 

Conclusion

We work for the money. It should be the opposite, Money should work for us,  or else it is deemed worthless. You are the master of your money. I hope this piece of advice helps you during this financial crisis. 

 

If you need your emergency fund to fight inflation to some extent and also to be in a liquid state, go for a Flexi FD plan with no lock-in period. guaranteed minimal returns.

 

Trust me, emergency funds are bliss to salaried individuals in the case of emergencies.

 

Thanks for your precious time spent reading the article.

 

Reference: Let's Talk Money by Monica Halan