Layoff has become a part of present day reality. Automation is taking away many jobs. Mergers and acquisitions are also another reason for layoffs. In the coming years, Artificial Intelligence is going to make more people unemployed. One must be ready for such a situation and must save for an emergency. Grieving and blaming oneself is not going to do any good. So, in this article, I am going to give you some tips on how to be ready for such an unforeseen thing.
1. Keep 3 to 6 Months salary in a separate bank account
If you can keep 3 to 6 months salary aside in a place where you will not spend it, you will be able to survive the time after your layoff without any worries. Also, you will be able to peacefully search for a new job. If you are a family man or woman, this must be done as a priority as you cannot afford to let the bad times affect your children.
2. Set savings Goals
If you could set apart a certain amount each month to save for an emergency, you can accumulate a good total which you can spend post layoff. Saving ten percent of your salary is a good idea. But that’s up to you. More the better.
3. Do not buy expensive things
When buying expensive things, people do not pay heed to the depreciating value of those things. Find inexpensive alternatives to those things. All that shine outside if of no use, if it eats up your money which you must save for emergencies.
4. Do not use credit cards
Whenever you swipe your credit card, you actually spend money before you earn. Also, if you are a habitual spender and an impulse buyer, better keep your credit card at home. If you stick to the monthly savings goal and accumulate enough money, you can say goodbye to credit card. Save first, spend later.
5. Sell stuff which is taking space in your home
You had purchased expensive furniture which is now taking a lot of space and lot of money from your pocket for its maintenance? Maybe you had bought a guitar so that you can learn it, but gradually lost interest in it. Then you can sell such stuff and make money.
6. Rent out that extra room
If you have a big house, you can rent out extra room or rooms for extra income. This is passive stream of income. You can accumulate enough money in an year to get yourself that extra vacation. But I would suggest you keep that amount in your savings account for emergencies.
7. Compare insurance plans
Car and motorbike insurances can take thousands of rupees out of your kitty every year. Before buying insurance for your vehicle, compare insurance plans of various companies. Even a rupee saved is rupee earned!
8. Cut your mobile phone bills
If your telecom operator has expensive plans, switch to another telecom operator. There are always better options available nowadays since the entrance of Jio in the telecom arena. Mobile Number Portability is easy and hassle free.
9. Open a daily collection account
A daily collection account can be opened with a co-operative credit society where you can save some amount on a daily basis. This is also called a pygmy account. It develops a habit of saving aside some money so that a good corpus can be built over time. Some Co-operative credit society offer a good interest rate on the savings. There is an opportunity to make some supplemental income, in case you can collect pygmy. Some co-operative credit societies offer a 2 to 3 per cent commission on the monthly collection. I have seen pygmy agents making a good side income from this easy one to two hour job.
10. Investment options
This is very important. In case you want to make emergency funds for testing times, you must invest in Term deposits and liquid debt mutual fund schemes. Term deposits can be Fixed deposits(FD) and Recurring deposits(RD). If you can invest a lump sum, go for FD. If you cannot invest a lump sum, but you have a fixed salary, go for RD. In Recurring deposits, you can deposit a fixed amount every month. I would suggest you to invest 10% of your salary in RD. But FD gets you more returns than RD. Term deposit is the safest option as you get fixed returns around 6 to 7 percent. Liquid debt mutual fund schemes do not assure fixed returns but people do have reported of getting 6 to 7 percent returns. A solid fund for emergency times is necessary. Hence invest wisely.
Final Words- Save for an emergency
Testing times do not come with a notice. One must be ready for any emergency like layoff. With the help of the above tips one can easily save for an emergency like a layoff. If you have not yet made your emergency fund, seems like you need to act now. Feel free to share your thoughts via comment box below.