Shield yourself financially from lay-offs ::Business Line

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��

Cut down your spending, but don't take the purse-tightening too far.

There is a lot of news these days about employees being laid off across sectors such as telecom, financial services and airlines. Being out of a job, involuntarily, can be tough. Along with a dip in morale, you will have to deal with meeting expenses without the comfort of the monthly pay cheque. Getting a new job may take time — from a few weeks if you are lucky, to a few months, if your skills and experience are not in demand. How does one manage financially in the interim? Here are some tips.

SAVE FOR THE RAINY DAY

Take count of your family's average monthly expense, including loan instalments, if any. Multiply this number by around six to eight times, add some more for unforeseen expenses, and stash away this amount as your emergency fund. Treat this fund as sacrosanct and do not use it otherwise. Keep this money in short-term bank deposits/debt funds, liquid funds which you can easily access. This emergency fund should hopefully see you through till you get the next job, without having to depend on family or friends, or borrowing on unfavourable terms. Make sure to replenish this fund after you are again employed.

SPEND LESS

Tough times may call for tightening your purse strings. Analyse your expenditure pattern, and try to cut it down. Some low-hanging fruits could be the use of public transport instead of the personal vehicle, and reducing the frequency of eating out. This will help just in case your job search takes longer than expected. But don't take the purse-tightening too far – this may reflect on your demeanour and hamper your chances of getting a job.

GET HEALTH INSURANCE

Health cover provided by the company ceases when you are no longer an employee. Big-ticket medical expenditure, if incurred when you are in between jobs, can blow a hole in your already fragile financial position. Make sure you take up additional health insurance and that it is sufficient to meet such contingencies.

RESTRUCTURE DEBT

If you are paying large monthly instalments on big-ticket debt such as home loans, consider approaching the lender to extend the tenure of the loan. This will reduce the monthly EMI, though it will also mean higher aggregate interest payment over the longer period of the loan. When you are back in employment and can afford a higher EMI, you could again ask for a switch to a reduced tenure. Tenure switches, though, will involve charges.

On the other hand, if you have high-cost debt such as credit card outstanding, consider paying off the entire amount instead of only the minimum amount due. Though this may add strain to already-stretched finances, it would prevent you from falling into a debt trap. Also, refrain from adding more debt on your credit card, and in case you make purchases on the card, ensure that you pay on time the entire dues (instead of only the minimum due).

IF YOUR COMPANY IS LETTING GO OF EMPLOYEES DUE TO STRAIN IN ITS PERFORMANCE, IT IS LIKELY THAT THE STOCK MARKET MAY BE TAKING A DIM VIEW ABOUT ITS PROSPECTS. YOUR INVESTMENTS, IF ANY, IN ITS SHARES WOULD ALSO SUFFER. SO, IT MAY BE A GOOD IDEA TO PARE INVESTMENTS IN YOUR COMPANY. EMPLOYEES OF LEHMAN BROTHERS WOULD HAVE LOST BOTH THEIR SALARIES AND THEIR INVESTMENT WHEN IT COLLAPSED.

JOB-LOSS INSURANCE

Some insurance companies such as Bajaj Allianz and ICICI Lombard offer job loss cover as an add-on cover along with their critical illness policy. In case of a job loss, the insurer pays a certain number of EMIs (say three instalments) on the loan borrowed by the insured. But there are strings attached, with job loss owing to specific reasons only being covered. This includes job loss due to closure of a department or division, or due to action of public authorities. In other words, if you are laid off citing supposed underperformance on your part, you would not be eligible for compensation . Recently, some insurers have been toying with the idea of offering standalone job-loss insurance policies which would offer cover based on the income level of the employee. Go through the policy to see if it suits you.

GET THE BEST DEAL

In the event you are asked to leave, understand the company's regulations and make sure you are not short-changed on severance benefits and other entitlements such as leave encashment. Be civil in your parting but assertive about your rights; you have little to lose.