Non-critical expenses such as eating out and movies should be stopped
Picture for representational purpose
Gone are the days of job security. A predominant majority of employees are now employed with the private sector, where jobs are not guaranteed for life. Anyone can lose his or her job any day. Being jobless is not easy as it will disrupt the routine and push his dependents into a mess.The first thing that would bother anyone during this difficult period is the management of their finances as they will not have a regular source of income. While the immediate task is to get a full-time job as soon as possible, they need to take some steps in the interim.
It is important to plan this aspect carefully, as the person will not receive a regular income to pay off debts, meet expenses and make investments. Here a few tips on how to manage money, till the next job comes along.
Take a freelancing job
You should consider taking up a part time job or freelancing job immediately to start getting some kind of income flow. Nowadays, with the advent of the internet and presence of multiple freelancing websites, it is not very difficult to get a job in your area of interest. Although this income may be much lesser than what you will get in a full-time job and may also not be regular, it will be a big boon during the jobless months. You can consider this for a short duration till you get a full time job.
Reduce credit card use
A common mistake, which most people commit when they do not have a job, is to meet expenses by using a credit card. Although this may seem like a feasible solution to manage expenses, you need to remember that it could help you only for the short term. After a month of two, you will eventually have to pay the credit card bills. By then if you do not have a job, you may have to default on payment, which could lead to higher charges and fees. Apart from this, the use of credit cards results in overspending, which is avoidable till you get a full-time job. So you should try to spend using cash or debit cards as much as possible as this will force you to spend judiciously.
Defer luxury spend
Many people do not segregate essential expenses from discretionary spending. Discretionary expenses are those which are not critical to your day-to-day living. These can either be in the form of big ticket expenses or small spending like eating out, entertainment, purchasing clothes and footwear, etc. You may think that eating out and going to a movie are essential for your day-to-day life. But when you don’t have a job, eating out or watching movies are definitely not necessary. So you must stop all non-critical expenses till you get a regular job. This can go a long way in increasing the cash left in hand every month.
Halt investments
When you are jobless, you can stop making your monthly investments till you secure a job. This will definitely cause a change in your financial plan. But when you are struggling with a financial crunch, it is best to plan your immediate expenses rather than think about long term goals. You can increase the monthly investments after you have secured a job, to compensate the loss of not investing in the jobless months.
Review liabilities
Loans and other liabilities can eat in your savings in the form of monthly EMIs. Although it is not possible to pay off all loans and become debt-free immediately, you should do some careful planning during jobless months. Segregate high cost loans from the less expensive ones. If you have received a termination bonus or a windfall in the recent past, you should use it to pay off the high cost debt. These are usually personal loans and credit card loans, which are not only very expensive but do not give you any tax benefits. Next, talk to your bank to see if they can give you flexible terms for a temporary period. Most people are burdened with home loan EMIs. You can discuss with your bank if they can give you an EMI holiday or slash instalment temporarily.
(The writer is the CEO of BankBazaar.com)
Next Story
