How to Deal with Job Loss?

5paisa Research Team Date: 19 Feb, 2024 01:14 PM IST

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In any day and age, losing a job can be quite stressful. With rising expenses, a sudden loss of income can have an impact on an entire family. This is particularly true for those houses that solely depend on a job for their livelihood. Many individuals struggle with how to deal with job loss. In such a scenario, it is important to remain calm and build a strategy by assessing the exact financial situation. 

In the present day, most families have investments, insurance, and mutual funds. Besides, with rising awareness and ongoing job cuts, a lot of individuals implement budgeting tactics to save money. Knowing how to channel all these methods and funds is crucial for saving money after a job loss. 

Figure out where the money stress is coming from

To resolve and handle any issue, the first step is to locate the source. It is the same when you lose your job or feel that there is a possibility of a job cut. Instead of dwelling on the stress job loss, try to identify why you are stressed. A major of stress is often associated with monthly fixed expenses. They can be    

1. Electric bills
2. School and tuition fees if you have children
3. Food and grocery

Some more intricate issues can be
1. Emergency medical bills
2. Any recurring debt
3. Negative or insufficient savings
4. Negative or insufficient emergency funds

The most effective way to avoid anxiety and economic disparity is to assess your income and expenses periodically. This can open the scope for savings and cutting down unnecessary costs. 

Create a budget or spending plan.

The most effective way to handle any form of financial stress is to have a plan in action. This is true for every individual, irrespective of the possibility of job loss. A proper budget and job loss savings can be a tested way to combat difficult situations in a competitive corporate landscape.     

1. The first step to budgeting is to evaluate total income. Include your salary, side jobs or any other source of money that comes in monthly or periodically. 
2. Calculate your expenses. Prioritising is key to budgeting, hence removing costs that are not important.

A proper budget is like a tracker and can save money-related worries. 

Reduce Optional Expenses

Most families and individuals spend their income on some common forms of entertainment like movies, going to restaurants, shopping, etc. Single individuals are even more prone to spending money on food orders and recreation. However, a key stage to saving money after job loss is to reduce these expenses as much as possible.  

Groceries cost way less than food ordered from outside. Also, with no limit on data, movies are available on phones, laptops and televisions. Resort to shopping only when necessary or look for sales and more affordable brands. 

Losing a job or the prospect of the same can cause depression among many. And in that case, some form of recreation is indeed required to cope with this stress. So do not eliminate. Rather, reduce and find alternatives that will better suit your current financial situation. 

Augment Your Income With Freelance Work

Freelance work can be a boost to your emotional and financial stability. The thought of some money coming in can help you if you are unsure of how to cope with job loss. It will also help in managing expenses.

Freelance work is also useful in case of pay cuts or if your income is proving insufficient against your expenses. It can prove to be a source of varied savings. In fact, freelance work often leads to skill enhancement. A stronger resume can help an individual apply for better opportunities. 

Fall Back On Your Emergency Fund

It is always advised to be prepared for emergencies. This can be a serious medical condition, any repair work at home, or losing your job. Having an emergency fund is a major way to alleviate the stress job loss. It acts like a safety net to fall back on for the time being before getting back on track. 

Start keeping aside fixed or variable amounts of money for any emergency based on your income. However, do not rely solely on your emergency funds. Plan strategically on how to use the amount with proper budgeting. Remove secondary expenses. 

Emergency funds are an effective job loss savings option. Evaluate the intensity of the situation and do not use emergency funds for any situation. If you have other income sources, avail of those and keep them more major crises. 

Check your eligibility for benefits

In several nations, unemployment insurance provides some money to individuals after going through a verification process. Offered by the Government, this can help in relieving some stress of unemployment till finances are managed. 

It is most useful when your job loss savings are almost at an end. It is thus essential to check for the benefits available in your country and go through the criteria to see if you are eligible. 

In India, the Rajiv Gandhi Shramik Kalyan Yojana offer income for almost a year. This gives individuals enough time to secure other employment. 

Use Systematic Withdrawal Plan For Regular Income

Investing in mutual funds and schemes is important to provide support in job loss or similar emergencies. If you have not created an emergency fund or do not have sufficient savings, reducing costs is not going to be enough. The little amount you have will be used up in no time, and no amount of budgeting will help in averting that. 

This is when it is important to tap into insurance and mutual funds. Use a strategic withdrawal plan to generate income from your investments over some time while you look for jobs. It might affect long-term return prospects but will surely help in reducing the stress job loss. 
 

Avoid Taking On New Debt

The most important thing to avoid after losing a job or having a salary reduction is to take the help of any loan. This is only going to add more burden to an already stressful situation. Focus on saving money after job loss from limited resources and freelancing work till you have the certainty of another job.

Conclusion

Job loss can be stressful, but with proper planning, it is possible to overcome this situation. The primary goal at this time should be to calculate income and funds and make a plan for selective expenses. Looking for temporary work and taking help from mutual fund schemes are also suggested. Implementing these useful financial tips to deal with job loss stress can help manage the stress of job loss effectively. 

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Frequently Asked Questions

The first step is to assess your finances and look for freelance work. Any temporary source of income will help to divert your mind. 

Make a proper budget and reduce all unnecessary expenses. Assess your funds and make a system of fund withdrawal. You can also opt for freelance work as an added source of revenue.

On practical grounds, it is suggested to reduce expenses and look for income sources. On an emotional level, you can seek the help of a family member or a professional to cope with severe anxiety or depression from losing money.