My cousin, age 40, married, with two kids, working with a Delhi-based start-up at a decent seven-digit salary, just lost his job!
With no cash flow to sustain operations owing to the Covid-19 pandemic and its impact on the economy, the start-up is on the verge of closing shop. To say the least, my cousin was unprepared for this.
We have been more like great friends over the years, and so he called seeking my advice. What follows below is part of the detailed email (edited for personal stuff) I sent him about how he can deal with the sudden loss of income and livelihood, and how he may move forward.
I don’t have an experience of getting fired at job but I have been through almost similar uncertainty and sudden loss of income after quitting my job in 2011.
The reason I am sharing this with you is because, given how things are falling apart all around (Uber just fired 3700 people, all at one go, on a Zoom call!), I thought the advice may benefit you or someone close to you who is facing a similar predicament either through a job loss, salary cut, loss of business income, or even complete closure of business.
I am not a financial advisor. What follows below is plain, simple advice that I offered to my brother. Nothing more, nothing less.
from: Vishal Khandelwal
date: May 14, 2020, 10:27 AM
subject: Lost Your Job? Now Don’t Lose Yourself
Trust you are feeling fine and keeping safe.
It was nice talking to you. I am sorry to know about your job loss, but as they say, sh*t happens!
Anyways, before I share what I think you can do to deal with the situation and also a way to move ahead, let me quote Nassim Taleb who said that the three most harmful addictions are heroin, carbohydrates, and a monthly salary.
So, knowing that you don’t do heroin and eat less carbs, let me congratulate you for you can finally get over your addiction of the monthly salary, at least for the time being. 🙂
Coming to my advice, some of which I already offered to you on phone, here it is –
1. Being fired at work is among life’s most stressful events. And so, my first line of advice is not financial, but emotional. Millions of people around the world have lost their jobs, or are on the verge of doing so, and so you are not alone. There is no doubt an unexpected job loss can rock your world, but it can also prove to be an experience that helps you grow and leads you to a new and better work and life ahead.
A job loss, even if it looks unexpected, is not a one-time event. It often involves the stages of denial, then anger, then bargaining, then depression, and finally acceptance. These are the five stages of grief, and a job loss must go through these as well.
I know you have been struck by grief. Now, I may sound a bit harsh, but you have two options to deal with these stages – one, you head fast from denial or anger towards acceptance, because that is the place you will anyways end up (moving fast will be less painful), or two, you take your time, keep ruing your situation, and go slow (more painful, simply because emotions will be involved for a greater amount of time).
Also, remember that the longer you take to come out of the situation emotionally, the greater and worse emotional issues you will impose upon your near and dear ones, especially your spouse, parents, and kids. So, better you get over the emotional hangover of a job loss soon.
Cry at times if you want, but please do not break. Acknowledge your emotions, then move on. Whenever you find yourself alone and struggling, talk to your spouse and/or your best friend. They can provide you comfort and encouragement and help you reign in those negative emotions.
2. My second advice is financial. The financial impact of job loss is probably the toughest challenge to face during this time, and so it is critical for you to develop a plan that reduces as much financial stress on you and your family as possible. Here are a few steps you may want to take to deal with such an unexpected event, so that you don’t end up making any desperate decisions –
- List down all money you have in the form of household savings and any income that you may earn through severance; plus any income your spouse may be earning. Then list down all your expenses – food, rent, EMIs, utilities (power, gas, Internet, phone), transportation, educational expenses, insurance premiums, credit cards, eating out, shopping, other monthly payments and expenses, etc., along with any new expenses. Then go through your expenses one by one, cut out all non-essential lifestyle-related items, and find ways to lower even the essential ones that you can. Simply put, analyse your variable expenses well, and find ways of doing away with some of them. Focus on both the large and small expenses, because holes, small or large, can sink a ship.
- Dip into your emergency savings to meet your living expenses. But be miser in using that too. Even if you thought earlier that that fund was good for 6-8 months, work on a lean budget so that the fund runs for, maybe, 10-12 months. Maybe! I know a lot of people who are used to saving regularly have a hard time dipping into emergency savings but surviving a period of unemployment is exactly why you have been saving this money. When you are back on your feet again, and I’m sure you will soon, you can replenish the funds. But for now, your emergency savings can be put to good use.
- Hide that credit card please! Do not, I repeat, do not assume that you can use that Gold or Platinum card to defer cash outflow by 50-60 days. After a job loss, if you will not buy something on cash, please, please, please do not use your credit card for that. It will be a financial disaster, given the uncertainty around your future income and the interest rates that get charged on deferred credit card payments. Question each expense real hard.
- Stop your SIPs or other new investment if need be. But do not sell your investments if you have enough cash as emergency fund that can last you 6-8 months or more (such is an emergency for which emergency funds need to be created). If you have a credit card payment pending, use your savings to pay that off. But remember, the idea for now is to free up your cash flows, instead of spending or investing it away. Still, re-evaluate your existing investments. If you have to spend more than your emergency funds, assuming you don’t create another source of income within the next 10-12 months, you may have to dip into your investments. So, re-evaluate now which ones you would redeem first.
- Check your health and life insurance. If your ex-employer provided these, and you did not have them personally, try to get them now. Without an ongoing income, insurance companies may seek greater number of proofs from you (like IT returns etc.) but having health and life insurance policies is a must, former for every member of the family and latter for the earning member. Especially, if a health emergency strikes at these times, and you are not covered, it may eat up your emergency fund faster than you would have envisaged.
- Evaluate your debt if you have any. Start by prioritising repayment of higher cost debt, like credit card debt or personal loan. Call you bank and ask for some relief on your EMI payments. Interest will still accrue but you will not be fined for missing payments for around two months, depending on your bank’s policies. Especially in these uncertain times, it is important for you to really know where you stand financially, and assessing your liabilities is one of the most important things you would do, largely because a third party is involved here who may not understand or appreciate enough what you may be going through.
- Ask for help when you need it. Do not shy away from it. Asking your spouse, or parents to chip with monetary, if they can, and non-monetary help is a good idea. Also seek the services of a good, honest financial advisor, if you think you cannot get your head around the financial situation. The advisor can help you set a budget, optimise your spending, and give you some clear-headed advice on cash, debt and investments.
3. My next advice is social. There is no point in not accepting that you have lost your source of income (for time being), and thus don’t shy away from explaining to your friends or family that you need to cut back right now. By eliminating social expenses like eating out or attending parties that may be avoided, you can free up cash to cover your essentials and also keep yourself from racking up new credit card debt, which will cause more financial stress.
4. Final advice – start preparing for the future, right away. Ask people you know of, maybe your ex-boss or ex-colleague for work options. A job loss can be a blessing in disguise. Maybe this is the time to start work on that start-up you always wanted to start up, of course after taking into account your financial standing. If you are a bit creative, or have a lot of experience under your belt, you can seek opportunities in the gig economy where you can find work under short-term contracts or freelance work. Spend time learning or honing a skill that people may pay for. The idea is to reach out as much as possible, towards people and opportunities that may help you come out of this crisis sooner. Spend no time in the vortex of desperation. Keep thinking about and working on ideas.
As the famous singer Bob Marley said –
You never know how strong you are until being strong is the only choice you have.
Seriously, you have no choice but to stop regretting what has happened in the past and stop worrying what may happen in the future but only focus on what you can do now.
Here, I also remember what Viktor Frankl wrote in his seminal book Man’s Search for Meaning –
…everything can be taken from a man but one thing: the last of human freedoms – to choose one’s attitude in any given set of circumstances, to choose one’s way.
It is not the end of world, believe me. Plus, almost everyone is facing some or the other trouble and you are not alone in it. So, don’t ever feel that way.
Just be thankful for everything you have now – a supportive family, emergency funds, savings, roof on head, food on plate, and skills you can improve upon to earn money in the future – and just get started again.
Treat the day of your job loss as the first day of the rest of your life. Start afresh. Make it count.
You can do it!
Love and a shoulder to rest upon,
That’s about it from me for today.