How to change your financial plan if you are in the throes of a job loss

The relationship with Job Loss during the pandemic

1Has your organization, like many others, also decided to downsize in order to stay afloat in these turbulent times? Your industry may have been hit hard, but finding another job could prove more difficult as almost the entire economy has been impacted by covid-19. The situation emphasizes the need to better control one’s finances and make fundamental changes to deal with the crisis.

If you are using a pre-authorized personal loan to meet an important and urgent household expenses? Should you invest part of your savings in stocks to take advantage of reasonable valuations? Or should you dip into your savings first to prepay that outstanding home loan to help ease your budget and monthly expenses? These are just a few of the financial dilemmas in many middle class Indian households. Hard times call for hard decisions. Good financial planning can help you and your family come out of this crisis with minimal damage.

What to do with this loan

2On normal times, prepaying a long-term loan can make sense, but in this new normal of unprecedented times, it’s best to avoid the rush to grab a low-cost home loan. In addition, interest paid back on a home loan is eligible for an income tax deduction of up to Rs 2 lakh, a factor that lowers the cost of this borrowed capital. This benefit can be negligible if one is unemployed and therefore has little or no income. Even then, instead of prepaying the home loan, one should focus on the other necessary expenses from savings.

The debt you owe

3Credit card debt is extremely expensive and since you can generate regular income for a while, pay off credit card debt must be a priority. Going for a moratorium may seem like a tempting option, but should be your last resort. Your assets are what should be of use to you in these stressful times, try to liquidate those that are not essential to getting money.

This is also a bad time to burden yourself with any new debt, so exercise caution and control when using quick personal loans with simple terms. If you have no choice but to borrow, go for a guarantee like that against gold, stocks, investments, insurance. Be careful not to over-educate yourself with lenders as this can negatively impact your credit score.

More important than investing

4Another essential financial commitment, especially during a pandemic, is insurance. Protecting your health, protecting the lives of you and your loved ones, and paying insurance premiums on time should be high on your list of priorities. You might be tempted to invest in stocks and make quick wins, but now is not the time to take such risks or take the plunge.

Also take these measurements

5You and your family should be willing to lead a non-extravagant lifestyle for a while and rework the household budget by removing all unnecessary expenses and discretionary items.

On a personal and professional level, you should take this time to improve your skills and reorganize yourself, taking an affordable or even free online course or certification to improve your employment prospects. Look for ways to monetize your skills and hobbies through freelance work, counseling, tutoring, etc. and generate income.