Hearing about potential layoffs from your employer is never a great time.
Unfortunately, layoffs can happen to anyone. The last thing we want is for it to catch us off guard financially.
Here are steps to take if you're concerned about potential layoffs or if they've been announced:
Have an Emergency Fund
Even with a severance package, having an emergency fund to fall back on will ease your stress. You can use your emergency fund to cover essential bills and expenses while you're on the job hunt.
According to studies, it takes 5 months on average to find a new position.1 So, it’s best to have about 3-6 months of expenses in savings in case a scenario like this ever plays out.
You can start building your emergency funds and keep them in an easily accessible fixed deposit or cash account.
Create a Bare-Bones Budget
A bare-bones budget is a minimalist spending plan that covers your basic necessities like rent, groceries, and medical expenses. This is so that you could reduce the chances of creating debt.
It also involves adopting a minimalist lifestyle. That means cutting out expensive takeout or unessential shopping until you're back on your feet with a job.
But the truth is, this would be a difficult transition if you haven't been resisting lifestyle inflation2. So, it's best to have a detailed financial plan that you can stick to during a layoff.
Review Your Insurance Coverage
Medical emergencies during unemployment can empty your savings. In Singapore, the costs of treating a critical illness alone can amount to $100,000 to $200,000 yearly.3 That is a lot of money to fork out even with a job.
So, take some time to review your insurance policy. Make sure you and your family are well-protected if a layoff does happen.
There are also insurance policies that might cover you during unemployment, which is a great option to consider if you’re expecting a layoff.
Maximise Liquid Assets
In uncertain times, having liquid assets at your disposal can be very helpful. These are assets that can be converted to be cash when needed.
Imagine relying on illiquid assets like property during a layoff. While illiquid assets are great long term investment choices, it also means they are poor sources for immediate funds.
So, make sure to diversify your assets across liquid and illiquid assets This way, you will still have quick access to funds during challenging times.
Diversify Your Income Streams
Did you know that 65% of self-made millionaires had at least three streams of income? Having a side income is a great way to build a safety net and increase your financial security if you're facing a layoff.
For instance, if you enjoy baking, you can start a weekend baking business. If you love writing, you can explore freelancing writing opportunities.
There are also investment opportunities you can start researching for, like creating a dividend portfolio. But before you start your investment journey, make sure to read this piece on How to grow your moneyin Singapore to start on a good foot.
With so many resources available online today, the choice of how to create an extra income stream is entirely yours.
Negotiate with Your Creditors
Did you know you could negotiate some of your loan payments during times of hardship?
Yes, for instance with credit card debt, it’s possible to request a lower monthly minimum payment every month.
While this is not a guarantee, it’s worth a try to call up your financial service provider. Regardless, it is still important to make minimum monthly payments on all your loans and not go cold turkey on them as the interest can add up significantly.
Conclusion
Getting through tough times, such as a layoff, requires having a positive mindset to tackle the situation strategically and proactively. By taking these steps, you can strengthen your financial resilience and better navigate the challenges of unemployment.
Lastly, remember to keep your resume updated and stay connected in your professional circles. Good luck!
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