Do Not Panic: 5 Immediate Financial Steps To Take If You've Been Laid Off

Probably the most dreaded word for any employee right now is layoffs.

In recent months, thousands of employees have been laid off by companies ranging from Microsoft, Google, Facebook, Dell, and HP to Byju's, Swiggy, and many others. And if you too are among those unfortunately laid off by your company, then one of the biggest headaches for you would be managing your finances, right?

Besides the stress of finding another job, you also need to handle your existing expenses. But instead of feeling disheartened and panicking, it's time for you to take the right financial steps to get yourself back on track until you get a new job or sort out other ways of earning income.

Wondering what to do? Read on as we explain how to remain calm amidst the chaos and take these financial steps you must take if you have been suddenly laid off.

Financial Steps To Take After Layoff

1. Assess Your Existing Financial Position

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The very first step to take when you get the unfortunate news that you're being laid off is to reevaluate your present financial situation. After all, how will you know what to do with your finances if you don't know what you have and what you owe?

Check your existing bank balance, savings, investments, assets, liabilities (such as loan EMIs, (if any), and current expenses, etc., so that you get a clear idea of where you stand financially.

This step will also allow you to assess your financial position, which can become the foundation for taking further financial decisions regarding how to manage your finances and recover from this adverse financial situation of being laid off.

2. Tap Into Your Emergency Fund If You Have

It's often the rainy days that remind us of the importance of having an umbrella, right? Such is the case with an emergency fund.

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For the uninitiated, an emergency fund is the money you set aside to cover your recurring and mandatory expenses, such as loan EMIs, house rent, children¡¯s education fees, utility bills, etc. This fund acts as a financial cushion you can fall back on when a financial emergency like a sudden job loss arises and temporarily halts your inflow of income.

So, if you have lost your job due to layoffs and have been maintaining an adequate emergency fund, this fund can help you out of such financial difficulties. You can utilise your emergency fund for repaying your loan EMIs, managing monthly recurring expenses, paying pending credit card bills, etc., if need be.

Also Read: Recession 2023 Fears Growing Everyday: Here's How To Be Financially Prepared For It

3. Redeem Your Low-Yielding Investments

Based on what investments you have at present, their returns, and the applicable interest rates on your ongoing loans, this step can help you manage your finances in case of a sudden job loss.

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As the interest rates on loans have been rising in the past few quarters due to the RBI's six back-to-back repo rate hikes, rates on home loans, car loans, personal loans, etc., have been going up too. So in case you have investments in low-yield instruments such as debt funds, bonds, and bank FDs, you can redeem them (if not at a loss) and use that money to pay your EMIs with higher interest rates.

For example, if you have a bank FD at, say, 6% and your ongoing loan interest rate is, say, 8%, 9%, or even more, doesn't it make sense to redeem the low-yield investment and use that money to pay high-interest loans?

4. Contact Your Lender For Relief In Loan EMIs

If you have existing EMIs to pay for loans such as car loans, personal loans, home loans, or any other loans, you must be aware of how to manage your loan EMIs when laid off and unable to repay them.

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While those who had an adequate emergency fund in place (which included loan EMI amounts) should use that for managing the EMIs, it would be wiser to also take note of other ways to manage your ongoing loan EMIs, especially for those who do not have an emergency fund to fall back upon.

Ways to manage your ongoing loan EMIs when facing difficulties in their repayment include the following:-requesting your lender for a loan tenure extension (as this will reduce the loan EMI amount), asking for a grace period if available, and redeeming your low-yield investments such as bank FDs, debt funds, etc. to repay the EMIs (as the interest rate on the EMI is likely to be higher than the rate of returns on these low-yield investment options).

You can read in detail about these ways by clicking here.

Also remember that any delay, or worse, default, in EMI payments can not only attract various fees, charges, and penalties, but it can also adversely affect your credit score, which could then hamper your eligibility if you wish to or need to someday take out a loan or credit card in the near future.

5. Look For Passive Income Sources

Whether you are an engineer, entrepreneur, doctor, journalist, or earn your bread and butter through any other career, there is some hidden talent, creative outlet, or hobby that we are passionate about, right?

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Ways to manage your ongoing loan EMIs when facing difficulties in their repayment include the following: So, what could be better than receiving some monetary benefit at a time when you are facing financial difficulties as a result of a layoff? When you enjoy doing something and are even good at it, then why not monetize it by turning it into a side gig?

While the list can be endless, some of the side gigs can be content creation, online tutoring, storytelling via podcasts, selling handmade and personalised goods, being a social media influencer, taking up vlogging, photography, renting out the extra room of your house, delivering food or parcels part time, etc.

To know in detail about these side gigs, click here.

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