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Financial planning for career downtime

How to Prepare for Unemployment While Employed ?


Get to Work on Building Your Unemployment Fund.... because

even banks deny your loan applications if unemployed.

As if being laid off weren’t stressful enough, most Indians don’t have enough money saved to pay monthly bills if they’re jobless for more than a few weeks.

But one can avoid such stressby creating an emergency fund now for potential unemployment period.

How much to save for unemployment?

The best time to save money is when you don’t need it; in other words, you should save while you’re employed. Having an emergency fund means you won’t have to turn to debt to get through a rainy day.

You can prepare for unemployment while still employed. In fact, there is no better time to prepare for unemployment than while you're still employed. While you can’t redo the decisions you’ve made over the past two to 10 years, you can make decisions now that will limit your exposure if your current employment ends.

First rule first
Pay yourself first'. It simply means that out of your monthly income, a certain percentage has to be saved before it is spent. Income (-) Saving (=) Expense Funds.

How much to save
10% of the post-tax income of those starting their career at around age 25 can be the starting point.
Over time, as the income increases, increase it to 20% can give you a good head start and a buffer.

The 50-20-30 Rule
50% of income > living expenses
20% of income > savings for your short, medium, long-term goals;
30% of income > spending, including outing, food and travel.

The 20/4/10 Rule
20% per cent of the car price as down payment (higher is better)
4# is number of years of financing.
(less is better)
10% of income for car loan EMIs

Emergency fund
A medical emergency may crop up at a time when the settlement claim is taking time, or the ailment itself may have a waiting period. In such cases, one may have to arrange for funds to tide over the situation. ideally 3-6 months' household expenses should be one's emergency fund.

Tips To Prepare for Unemployment

  • Save Money
  • Delay Major Purchases.
  • Get Part time works as feeder income.
  • Live on One Salary (1/2 if you have one).
  • Use Credit Cards for Emergencies Only.
  • Don't wait to get fired, better switch.
  • Consider Further Education (skill upwork).

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