I Lost Job – How should I plan my financials for next 1-2 years?

I Lost Job – How should I plan my financials for next 1-2 years?

Corona virus is showing worse across the world. There are thousands of employees who are losing their job now every day. While Government of India says no company should do layoffs, companies are not in a position to pay salaries and they don’t have any choice except to cut salaries and do layoffs. There are hundred’s of start-up companies that are getting shut down due to covid-19 pandemic. One of our blog reader wrote email to me saying “I Lost job, how to plan now during corona virus where I can’t get job for 6 months to 9 months. I have some money, but how to do financial planning in proper way”. You might be the victim and lost job or might be thinking that what happens if you lose job now in this crisis. In this article, we would provide some tips on how you can plan your financials in case there is a job loss or an indication that you might lose your job in the near future.

Also Read: Which are best part time business ideas to start in 2020?

I Lost Job – How should I plan my financials for next 1-2 years?

You lost job and not nope. Heaven would not fall. First, stay calm and then do small planning. While there is no hard and fast rule, you can follow these steps.

Step-1 – Assess your current situation

Step-2 – Cut down expense + Pause your investments if you can

Step-3 – Check for source of Funds to survive

Step-4 – Create a small financial plan for 1-2 years

I Lost Job – How should I plan my financials for next 1-2 years?

Now let us go into detail.

Step-1 – Assess your current situation

1) Do I have an adequate term insurance plan: This is the first step in financial planning, if you have missed to take earlier, you are in a little trouble. Check if you can get a good term insurance plan faster. Approach insurance company policy and look for a lower premium term insurance plan considering your situation.

2) Do I have an adequate health insurance plan: If you have only company paid health insurance, you are in a little trouble. Try to get a health insurance plan as early as possible if you can. Take a family floater health insurance plan to cover your dependents too.

3) What are my expenses: Assess your current monthly expenses which includes expenses for groceries, EMI’s, credit card bills, child school fees or college fees, etc.,  Assume you may be out of job for next 1-2 years, you might need 2 years expenses to bear till you might find a new job as getting a job could delay due to curved-19.

Once you finish step-1, you are clear about your current situation in terms of insurance and your current expenses. Let’s go to the next step now.

Step-2 – Cut down expense + Pause your investments

1) Can I cut down expenses: Check what you can get rid of from your expenses and arrive at what you can really need to spend for next 1-2 years. Assume that you might need Rs 30,000 per month and for 2 years, you might need Rs 7.20 Lakhs. Is there any way you can cut down these expenses, reduce by 25%. Think, think..

2) What am I paying: Check what is your outflow for investments. It could be insurance-cum-investment plans or mutual fund SIPs or Systematic Equity Plan in Stocks. Ask yourself, do you need insurance-cum-investments. Is there any way you can surrender them now (ensure you have adequate life insurance policy for risk coverage before you do that). Can you pause your mutual fund SIPs? Can you stop your stock market investments temporary? Don’t think that you would miss the opportunity of buying at lower levels of stock markets. Raelise that you are not at the investment stage now. You need to survive in the current crisis with minimal negative effect.

3) Can I reduce loan EMIs: Check if you can move your loans to lower interest rate. E.g. moving home loans to banks like SBI can reduce your EMI and interest significantly.

4) What’s your outlook now: Since you checked and optimized your expenses, you are now aware how much money you need towards expenses every month for the next 1-2 years.

Once you finish step-2, you are clear about your current situation, how much you are spending and how much money you need for next 1-2 years for essentials after cutting down unnecessary expenses. Let’s go to the next step now.

Step-3 – Check for source of Funds to survive

1) Can you survive now with no further action: Do you have adequate money to survive for the next couple of years without selling stocks or mutual funds or real estate. If yes, you have done good financial planning, if not, continue the next steps to still hunt how you can get additional funds.

2) Can you use emergency money: How effective is your emergency fund now? Can you still hold emergency fund unless you are in real financial crisis now. If yes, for how long you can hold it. There are several alternatives to Emergency fund too. Ask these questions and you would get several positive tips on how you can survive with current money which you are holding.

3) Can you Sell liquid funds / debt funds: Can you sell any liquid mutual funds or debt funds which you are holding without losing any money?

4) EPF withdrawal: How about withdrawing EPF due to covid-19 pandemic. You can get 3 months (basic salary+DA) of salary as per the new guidelines.

5) Any other source of funds: What are various sources where you can get money now other than personal loans from the bank. Can you get back any money which you would have given to your friends or relatives as hand loans?

Once you finish step-3, you are clear about the current situation, how much money you need, how much money you have and how much you are planning to get from various sources. Let’s go to the next step now.

Step-4 – Create a small financial plan for 1-2 years

In this stage, you have a plan where you would be able to get money to survive for 2 years. First get these funds and execute below steps.

1) Keep 6 months of funds required for your expenses in a bank FD. You can create 6 FD’s starting with 1 month to 6 months. Every month one FD would get credited to your SB account like salary. Keep another 18 months of money in a liquid mutual fund. After 6 months, you can withdraw from liquid funds through SWP a fixed amount. Again, this would work like salary. This is for those who feel secure about investing money in liquid mutual funds.

2) If you feel insecure about putting money in liquid funds, just keep money in bank FD’s of two banks. While you keep money for first 3 months, balance create FD’s that gets mature every 3 months, i.e. 1 for 3 months, 2nd for 6 months, 3rd for 9 months etc., Use these funds for your planned expenses every month.

Losing a job is not failing in life. It is part of a journey in the life!!!

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Suresh KP

I Lost Job – How should I plan my financials for next 1-2 years

Suresh KP


    1. Hello Ramu, There are some options in EPF where you can do partial withdrawl of your EPF account. Yes you can always explore to pay off high cost personal loan. However one should note that your retirement kitty would be reduced.

  1. Hi Suresh!

    Good article on current scenario! Well I have company provided Health insurance with SA 3 Lacks for entire family. Recently I bought Top up health insurance from Tata AIG with SA 15 of Lacks which would kick in only after a 2 Lacks from primary insurance are used. Tata aig I am paying 4400 per annum to cover my family of 3.

    Is it a good idea to go for top up of I would have gone for another health plan? Please advice.

      1. Considering, primary health insurance cover for entire family is only 3 lacs. Is it adiquit cover in current times for entire family? Top up also cover Covid19 hospitalization.

        1. If the 2nd policy / top up policy is to enhance the value of the health insurance, you can go head. 3 Lakhs health insurance might not be sufficient.

  2. suresh sir, this is not about the above topic..
    i have around 5k money in karvy demat account.. and also some shares worth 80k in karvy account..

    what should i do now??
    they are not responding properly.. plzz guide

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