Losing a job during these tough times seems like an inevitable situation for many people. So, what can you do for your finances if you are let go?
Earlier this month, Bank Negara Malaysia (BNM) Asisstant Governer, Marzunisham Omar in a virtual press conference said, Malaysia’s unemployment rate is expected to shoot up to 4% this year, from 3.3% in 2019.
“We expect the labour market to be considerably weaker and the unemployment rate to increase to about 4% in 2020″
At the same time, on the global level, the International Labor Organization estimates that nearly 25 million workers will lose their jobs, with loss of incomes of approximately US$3.4 trillion (RM14.8 trillion).
If you suspect a layoff is imminent or you already experiencing it, it’s important to prepare. Losing a job is scary and stressful, but you can mitigate the damage by taking as much control of the situation as possible now.
1. Slash your budget.
Your first step should be to examine your expenses and look for any non-essential spending you can cut right now.
Work with a bare-bones budget and establish the expenses you need to live and focus on cutting spending. Obviously, you have to keep the lights on and feed your family but you should aim to pause any discretionary spending.
“You need to figure out how long you can go if your job is cut back or terminated. Then you can make decisions accordingly,” said Ande Frazier, a certified financial planner and CEO of MyWorth.
She suggested pausing gym memberships, canceling streaming services not in everyday use, pausing transportation costs (such as train passes), stopping auto refills or subscriptions, and cutting down on shopping for things you don’t absolutely need.
And don’t feel bad if you need to slow down on your savings goals for the time being. Making sure you can cover your basic living expenses should be a priorities over saving up for your holidays.
2. Prioritize your bills.
So once your budget is pared down, take a look at the expenses you have left and decide which ones are most important to continue paying if money gets tight.
“Food and housing expenses are essential to cover if you have limited funds, so prioritize allocating your funds to those expenses first and foremost,” said Brittney Castro, the in-house certified financial planner for Mint and Turbo, and founder and CEO of Financially Wise Inc.
Next, Castro said you should call your service providers (cell phone, internet, cable, etc.) and find out what sort of options you have to reduce or pause your payments temporarily.
“Beyond that, you want to protect your credit for the future, so try to keep credit expenses low, and pay your minimum debt payments so you don’t default,” Castro said.
3. Deal with your debt.
Speaking of debt, this is an area of your budget where you may be able to find temporary relief.
“If you are currently facing or anticipating a reduced income during this time, as a first step you should reach out to your lenders, providers and landlord to preemptively discuss temporary payment relief options,” said Adrian Nazari, founder and CEO of Credit Sesame.
This means that you have the option to delay paying these bills without a negative impact on your credit score or losing service, and allowing you to prioritize paying for necessities like groceries and pharmaceuticals. Be sure to explain that you’re facing financial hardship due to income loss.
Even if you aren’t able to pause payments or get penalties waived, there are a few options for at least reducing the monthly bill.
If you’re carrying credit card debt but have a decent credit score, look for a balance transfer deal. In order to attract new customers, credit card companies will offer 0% interest for around 12 to 18 months if you transfer your balance over from a competitor. Though there is usually a fee involved ― around 3% to 5% of the balance ― it’s usually worth it to avoid accruing interest for a year or more. During this time, your payments will go 100% toward the principal, allowing you to pay it off faster.
4. Start networking like crazy.
Job hunting landscape are rapidly changing. Not only are there fewer jobs available as businesses continue to shutter, you’re now competing against all the other workers who’ve recently been let go or furloughed. Not to mention, in-person networking and interviews aren’t a possibility.
That’s why now is a good time to get ahead on your job search and reach out to some of your trusted contacts to let them know you may be making a career change soon, according to Christy Noel, a career expert and author of “Your Personal Career Coach: Real-World Experiences for Early Career Success.” This allows you to line up references you’ll need as you begin interviewing for new positions.
Plus, it alerts your network that you might be job hunting soon, so they’ll keep you top of mind as they come across open positions.
However, Noel warned against hitting up your connections for jobs right away.
“Reach out to say ‘hi,’ send articles that may be of interest, comment on their LinkedIn posts . Get back in touch so you can reach out to them and they’ll be receptive when the time is right,” she said.
If you are someone who believes strongly in financial planning, perhaps a career in Financial Advisory is your calling.
5. Find a side hustle or ramp up the one you have.
The working world is changing in the face of technological update and becoming more competitive, it may be some time before you’re able to secure full-time income again.
“One of the best ways to prepare for losing your job is to start a side-gig that allows you to replace the income that you may soon lose due to an impending job loss,” said Roy Morrison, digital marketing and growth strategist for Meaningful Profits.
Though it’s unlikely that your side gig will replace your full income in the beginning, it’s a great way to beef up your emergency fund. And over time, it might be able to replace your current income or even surpass it. It is very risky to depend on a single source of income, as it can vanish any day.
Morrison said. “For that reason, I believe working on a side gig to develop a second source of income is the best way to prepare for potentially losing your job. It will give you some peace of mind knowing you have options.”
Losing job is not a child’s play and require us to reassess our personal finance goals and prioritizing our necessities. Look at this as an opportunity to focus on your family well-being and nurturing yourself.
But, you can always make a preparation ahead of the possible recession because believe it or not, you are not alone in this battle.
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What other tips do you think can be beneficial when face with unemployment? Share with us in the comments section below.