5 ways to keep your finances in check after losing a job

Job losses worldwide are estimated at nearly 25 million workers this year. (Rawpixel pic)

Bank Negara Malaysia assistant governor Marzunisham Omar has said that the central bank expects the labour market to be “considerably weaker” this year and Malaysia’s unemployment rate is expected to rise to 4%, from 3.3% in 2019.

On the global level, the International Labour Organisation estimates that nearly 25 million workers will lose their jobs, with a loss of income of US$3.4 trillion (RM14.8 trillion).

It is important to get ready if one suspects a layoff is imminent, or if it has already happened.

Losing a job is scary and stressful, but the damage can be mitigated by taking as much control of the situation as possible.

1. Slash your budget

Work with a bare-bones budget – establish what expenses are needed to live and focus on cutting spending. Obviously, electricity and food are necessities but any discretionary spending must be reduced.

“You need to figure out how long you can go if your job is cut back or terminated. Then you can make decisions accordingly,” says certified financial planner and CEO of MyWorth Ande Frazier.

Pause gym memberships, cancel streaming services not in everyday use, pause transport costs (such as train passes), stop auto refills of debit cards, payment apps or subscriptions, and cut down on shopping for things that aren’t absolutely necessary.

Slow down on savings goals for now. Covering basic living expenses is more important than saving up for a holiday.

2. Prioritise bills

Review the expenses left after paring things down and decide which ones are most important to continue paying if money gets tight.

“Food and housing are essential to cover if you have limited funds, so prioritise allocating funds to those expenses first and foremost,” says in-house certified financial planner for Mint and Turbo and founder and CEO of Financially Wise Inc, Brittney Castro.

Call service providers (handphone, internet, pay-TV and so on) to find out the options to reduce or pause payments temporarily.

“Beyond that, you want to protect your credit for the future, so try to keep credit expenses low and pay the minimum debt payments so you don’t default.”

Prioritise expenses and contact service providers to try to reduce or pause payments temporarily. (Rawpixel pic)

3. Deal with debt

Debt is an area of the budget that may provide some temporary relief.

“If you are currently facing or anticipating a reduced income during this time, as a first step, reach out to lenders, providers and the landlord to preemptively discuss temporary payment relief options,” said founder and CEO of Credit Sesame Adrian Nazari.

This means having the option to delay paying these bills without a negative impact on the credit score or losing service, and allowing one to prioritise paying for necessities such as groceries and medication. Explain the financial hardship due to income loss.

Even if payments cannot be paused or penalties waived, there are a few options to at least reduce the monthly bill.

If one’s credit score is decent, look for a balance transfer deal. In order to attract new customers, credit card companies sometimes offer 0% interest for 12 to 18 months if one transfers one’s balance over from a competitor.

There is usually a fee involved ― about 3% to 5% of the balance ― but it is usually worth it to avoid accruing interest for a year or more. During this time, payments will go 100% toward the principal, so it will be paid off faster.

4. Start networking like crazy

The job-hunting landscape is changing. Not only are there fewer jobs available as businesses continue to shutter, others who have recently been let go or furloughed are also competing for them.

This is why now is a good time to get ahead on a job search and reach out to trusted contacts to let them know a career change may be imminent, according to Christy Noel, a career expert and author of Your Personal Career Coach: Real-World Experiences for Early Career Success.

This allows the individual to line up references as they begin interviewing for new positions.

Plus, it alerts the individual’s network that they might be job hunting soon, so the network will keep the person in mind if they come across open positions.

However, Noel warned against hitting up 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 will be receptive when the time is right.”

Get in touch and let one’s network know on may be looking for a job in the near future. (Rawpixel pic)

5. Find a side hustle or ramp up the one you have

“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 digital marketing and growth strategist for Meaningful Profits Roy Morrison.

Though it is unlikely a side gig will replace the full income in the beginning, it is a great way to beef up the emergency fund. And over time, you might be able to replace the current income or even surpass it.

Conclusion

Losing a job is never easy and necessitates reassessing personal finance goals and prioritising needs.

Think of it as an opportunity to focus on the family’s well-being and nurture oneself. Remember, any eventuality can be prepared for because no one is alone in this battle.

This article first appeared in MyPF. Follow MyPF to simplify and grow your personal finances on Facebook and Instagram.