The COVID-19 pandemic has taken a toll on several businesses and has resulted in many people losing their jobs. If not for losing employment, people have taken pay cuts and have their salary appraisals deferred for at least a year. The ones that are still employed are worried about the situation deteriorating and fear of being unemployed.
People prefer to be employed rather than running their own business as the former provides security in the form of a constant regular income. However, there are parameters beyond your control that influence your employment status. Being unemployed causes financial distress and throws up mental challenges.
The situation is complicated to deal with, especially for the ones who have taken up financial responsibilities such as home loan and insurance policy. At this point, staying calm solves half of your problems. To avoid situations like this, financial experts recommend building emergency funds and availing suitable insurance policies.
Here’s how you can deal with your financial commitments if you lose your job:
i) Talk to your lenders:
Being unemployed and having a loan to repay is one of the deadliest combinations. You will have double trouble of being jobless and staring at loan default. At this point, the best option you have is to talk to your lender and explain your situation. Try to restructure your loan.
This may involve reducing your equated monthly instalment (EMI) and increasing the loan tenure. This is extremely important. If you don’t take this step, then you will default on the loan, which will impact your credit score. The Reserve bank of India (RBI) has announced a moratorium on term loans due to COVID-19 pandemic, make use of it.
As the situation improves and on getting a job, start repaying your loan. Remember, availing the moratorium on loans would increase your interest payable. Therefore, ensure that you get on the repayment track as soon as possible.
ii) Make use of your EPF
Your commitments do not end on just taking care of your loans. You still have to provide for your family. If you have not accumulated an emergency fund, then you may rely on the money collected in your Employees’ Provident Fund (EPF) account. However, you have to be cautious when it comes to spending.
Stay away from the luxuries and utilise your EPF corpus only on the necessities such as groceries, rent, children’s school fee and, so on. Do your best to find employment as soon as possible so that you don’t have to rely on your EPF corpus, which is meant for your retirement purposes, for a long time.
iii) Stop your investments
If you have an ongoing SIP in mutual funds or are investing a sum regularly into any investment scheme, then stop your deposits immediately. Understandably, you have invested with a particular goal to achieve. However, if you are unable to sustain yourself at the moment, then what is the point in planning for a better future?
You have to take care of your current expenses before planning for the future. If your EPF or emergency fund is not enough, then you may utilise the corpus accumulated in your investment account. Ensure that you get back on the investing track as and when you find a job.
Everything has ups and downs, and job markets are no exception. The modern world is highly unpredictable. The only way to keep unpleasant surprises at bay is by being prepared. The times like this have reiterated the importance of accumulating an emergency corpus. First deal with your liabilities by speaking to your lenders and obtain some kind of respite before anything else. Once that is done, wisely utilise your EPF, savings and investments on necessities.
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Engineer by qualification, financial writer by choice. I am always open to learning new things.