How to financially prepare for a layoff
More often than not, most people are caught off guard when they are retrenched, but it is important to acknowledge and accept that it is a possibility that can happen not only to workers above a certain age, but to everyone.
As the world grapples with strained economies, retrenchments are unfortunately becoming a reality for many. While losing a job can be a traumatic transition, being financially prepared is a great way to have a buffer between you and the ever-constant curveballs.
More often than not, most people are caught off guard when they are retrenched, but it is important to acknowledge and accept that it is a possibility that can happen not only to workers above a certain age, but to everyone.
Here is how you can prepare.
Have an Emergency Fund
This should be a priority as it has long-term financial benefits. It is smart to have a liquid emergency fund in a secure place that you can easily access. The set-up emergency fund cushions the blow in the event of an unforeseen emergency, such as a job loss or a large medical expense. It helps turn a would-be life crisis into a slight inconvenience before you secure new employment.
Create Monthly Budgeting Goals
Consider using the 50/30/20 budgeting rule to divide your income among needs, wants, savings, and debt repayment. The goal is to have a plan for every shilling you have and plan for expenses before they happen rather than waiting for emergencies and hoping you have enough money to cover essential costs.
Diversify Your Income Streams
Diversify your income by exploring side hustles or freelance opportunities. You could achieve this by investing time and effort in building your personal brand and developing your skills and network to increase your chances of securing side gigs. Having multiple income streams can cushion the impact of a layoff while seeking new employment.
Seek Professional Financial Help
In the event that you get laid off, someone completely independent of your economic life can give you a reality check on overspending and living beyond your means. A financial planner can provide an unbiased, objective view of your current situation and will be able to help you make the best decisions regarding your severance package, retirement fund benefits, group life cover and medical aid.
Plan and Save For Retirement
Planning and saving for retirement means figuring out how much money you’ll need to retire comfortably and developing a strategy towards that. Your set target is dependent on your saving and spending habits, goals, and lifestyle preferences.
Starting out early also gives you a larger portfolio and is crucial because poor health could make early retirement a necessity. In as much as it’s never too late to start saving for retirement, it is also never too early to begin saving.
Adjust Your Insurance Coverage
It is important that you assess all your insurance policies to ensure they sufficiently protect you and your family during a layoff or budget cuts. Review your health insurance coverage and understand the options available if you lose the employer-sponsored benefits. Adjusting your coverage in advance can help you maintain financial stability during challenging times.
Protect Your Risk
In the event that you have employer-sponsored benefits such as group life cover, it would be wise that you check in advance whether it provides you with a continuation option that allows you to retain the life cover without undergoing medical underwriting. Give your medical aid debit order instructions to ensure that there is no lapse in coverage during the trying time.
Keep Up with Job Market Trends
To remain competitive, keep yourself updated with industry trends and job market developments. Enhancing your skills through online courses, certifications, networking workshops and attending relevant industry events will give you insights into potential opportunities.