As the economy recovers from the crippling effects and devastating impact of the COVID-19 pandemic, layoffs and furloughs are on a rise, since the number of people unemployed has increased disproportionately to the number of vacancies. To add to the turmoil, it has become particularly difficult for people who have lost their jobs to alter their personal lifestyle and rethink their finances. In this article we address what possible steps you can take to save yourself from ever-rising debt in such times.
What is Retrenchment?
Simply put, retrenchment signifies loss of job. The term “retrenchment” covers a wide-range of dismissals that do not necessarily relate to the conduct or capability of the worker. The pandemic has made it necessary for certain organizations to cut-back costs and expenses to stay afloat. As a result, many businesses have been forced to cut their staff, resulting in a higher-than-usual number of layoffs throughout the world. Retrenched or not, a significant portion of the economy has been struggling to manage their finances during the pandemic. If you’ve suddenly lost your job and have nothing to show for it in savings, here are some valuable tips you’ll need to avoid going into debt. Remember, the sooner you straighten things out, the faster you will recover.
Restructuring Personal Budget
The first and foremost step of managing your finances during retrenchment is to restructure your personal budget and making only smart purchases. For instance, you should start by identifying non-essential and luxury items, and should consider avoiding using such articles. On the other hand, Semi-essential products are not necessarily for survival either, but they enhance your comfort. If feasible, avoid spending on them or search for less expensive alternatives. Also, it is advisable that you stop exploiting your credit-cards and personal loans to make purchases.
This is one of the most crucial stages towards achieving financial freedom. Consolidate a list of all your outstanding obligations, together with the interest rates you are paying. Then you may request your bank for a single loan to pay off all of your outstanding debts. This way you will only have to concentrate on only one outstanding loan. This works especially well in cases of multiple personal loans or credit card debts since the interest rate on such loans decreases.
Review Insurance Policy
Reviewing your insurance policy and getting in touch with your insurance agent is another crucial step towards financial freedom. You must ensure you’re your policy does not lapse during this period, since you’ll be in an exigent need for an insurance coverage during such times. Also, if you cannot afford your current premium plans, you may need to switch in-between other available options.
Build an Emergency Corpus
Emergency corpus basically signifies a reserve fund. It is critical to maintain a corpus on hand for any type of emergency. It would be prudent to tap into it, if necessary, rather than borrowing hastily and sacrificing on interest rates and fees in order to have rapid access to money. Emergency requirements are inconvenient, and the urgency of the demand, as well as the quantity necessary, can be intimidating.
Start Budgeting your Expenses
Budgeting your expenses, rigorously following your budget and altering your habits and lifestyle can also help you free up parts of your money.
Contact your Creditors Immediately
If you do become retrenched, it is advisable that you contact your creditors immediately to inform them of your situation and discuss arrangements to make adjustments to your repayments as quickly as possible.
Find a Secondary Source of Income
Side income is what people pay you for doing grunt work while you are looking for a job. It is human tendency to dismiss opportunities for earning a side-income if they don’t match our career skills. However, in such times your priority should be to derive income from whatever sources possible to stay afloat.