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Managing your money when you are unemployed

by Tavaga Invest

The second half of 2022 was riddled with layoffs with startups and tech companies leading the charge.

More than 150,000 workers were let go by tech businesses in 2022, more than during the Great Recession from 2008 to 2009. Startups in India have let go of close to 20,000 workers as well. Employees who were unexpectedly let go face a hiring freeze in the market and bleak prospects of obtaining a job with a similar level of pay.

Managing your money when you are unemployed can be a challenge. It’s important to be mindful of your spending and develop a budget to help you make the most of your resources. 

Here are some tips to help you manage your finances when you are unemployed

Make a budget: Make a list of your monthly expenses, including housing, food, utilities, transportation, and other necessary expenses. Once you know your expenses, you can figure out how much money you need each month to get by. It also helps to identify and curtail unnecessary expenses. 

Needs vs Wants: Learn to categorize your expenses between ‘Needs’ and ‘Wants’. Decide which expenses are the most important and make sure you pay those first. For example, you should always pay for housing, utilities, and food before other expenses.

Try to reduce your discretionary spending like dining, entertainment, and shopping. 

Look for additional sources of income: If you are unable to find work, consider freelance work, selling items you no longer need, or taking on a side job. Every little bit helps.

Monetize your assets: You can sell used items like an exercise machine that you no longer use or rent your car to cab aggregators to make extra cash.

Deal with debt: Consider asking the bank for a temporary EMI waiver if you have a home loan or student loan that you need to pay back. Before suspending the payments, however, make sure to speak with your lender because doing so could severely harm your credit history. As an alternative, you can ask lenders to extend the loan’s term, which can lower your EMI obligations. When you are jobless, try to avoid taking on any additional debt. Look for low-interest solutions, such as a personal loan from a friend or relative, if you do need to utilize credit.

Reallocation of your portfolio: When unemployed for a longer period, it is important to have your investments generate income for you. Consider reallocating some funds from growth investments to income generating investments. For example, you can reallocate some funds invested in growth mutual funds to monthly or quarterly income generating instruments like bonds or dividend mutual funds. 

Look for additional sources of income: If you are unable to find work, consider freelance work, selling items you no longer need, or taking on a side job. Every little bit helps.

Acquire New Skills: You can utilize your time wisely by taking advantage of  tons of resources available online to upskill yourself. It might open up new opportunities and help you become future-ready.

These are a few things one can do to effectively deal with being unemployed. But, it is better to be safe than sorry. Hence, preparing an emergency fund is crucial.  The phrase “emergency fund” refers to money set aside for use by individuals in times of adversity. Cash and other assets with high liquidity tend to make up an emergency fund’s assets.

It is advised that those with secure employment set aside 3-6 months’ pay into an emergency fund, while those with less secure employment should aim to save 6-12 months’ pay.

This acts as a cushion for when things go south.

Being unemployed can be tough, but it is important to keep a positive attitude and stay focused on finding work. 

Tavaga is everything you need to start saving for your goals, stay on track, and achieve them in time. 

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1 comment

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