Always be prepared for consequences of job loss

Savings or emergency funds can help sustain those who have lost their regular income as they look for new opportunities. PHOTO | FILE |  NATION MEDIA GROUP

By SANDRA CHAO-BLASTO

In Summary

• Keep savings
• Plan job switches well
• Avoid unnecessary expenses

Losing a job can have devastating effects both physically and emotionally. But with changing trends in employment globally, workers must at all times stay prepared for the worst.

According to PricewaterhouseCoopers (PwC) the era of three to four year job postings is long gone with, the global average dropping to just 18 months.

PWC reckons that more firms are seeking human resource for shorter assignments and placements with this global trend more than doubling in the last ten years.

In the last year alone big firms such as Eveready Kenya, East Africa Breweries Limited, Tata Chemicals, Coca-Cola, Co-operative Bank, and Cadbury East Africa engaged in massive retrenchment of their workforce in a bid to bring down operational costs.

An increasing number of companies are also recruiting their workforce on a contractual basis for not more than three years with some opting to renew workers contract annually based on their performance.

Quit

Making a conscious choice to move to greener pastures can be less devastating than when out of the blues your company declares you redundant, though this upper hand situation quickly changes on realisation that the new job is not what had previously been anticipated.

Some people then opt to quit from this new job rather than stay in another unfulfilling position.

There are also those employment opportunities tied to political appointments as in the case of county officials who come the next general elections might find themselves jobless if their preferred candidate is not re-elected.

While psychologists don't recommend tough decision-making by distressed laid off workers, failure to control expenses by the unemployed can easily leave them with huge debt burdens.

James Ngugi, a personal finance advisor with Zimele Asset Management, says that those who find themselves in such situations need to have a closer analysis of not just their life in general but also critique their finances.

“You are coming from a point where you were assured of some income at the end of the month to a point where that running stream is cut off, so you really need to develop a sense of financial discipline,” he says.

According to Mr Ngugi, those who have been setting aside money for the ‘rainy day’ find it easier to cope when they are unemployed rather than those who lack a savings culture.

If you solely depended on your pay cheque to survive from one month to another, you need to get rid of unwanted expenses until you secure new employment.

This will include Internet costs, magazine subscriptions and Paytv, though expensive habits like eating out going to the movies or for spa treatments should also be halted.

Having savings or an emergency fund can come in handy and one needs to consider how long the money can last while maintaining their current lifestyle or whether they need to have leaner budgets in order to make it last longer.

“You need to look at your expenses on a daily and even monthly basis to see what you can do without so that you end up with a skeleton of your ordinary budget to ensure that you survive on the bare minimum,” he says.

Disposing off assets that are easily liquidated and that can be easily reacquired when in a more financial stabile situation like your car, extra TV or entertainment system and the laptop you rarely use since buying the tablet, is also advised.

You could also decide to rent out the extra room in your house or move in with friends or family in order to split recurring expenses like rent, water and electricity bills.

If you are a home owner you could also opt to move into much cheaper accommodation and rent it out in order to receive some form of monthly income to deflate the financial pressure.

Talk to your current creditors and find out if there are alternative ways of making delayed payments or stopping the line of credit altogether.

Package

He advises that you should not be afraid to look for short-term jobs that might be below previous pay grade as this might help in paying any outstanding bills.

“Staying in the job market with a part time job will also make you positive and focused in the search for stable opportunities.

You will continue to keep you up to date with the current job market trends and you are more likely to hear of opportunities among your peers and networking circles,” he said.

It is important to check with your employer if there is any severance package that might cushion you as you hunt for a new job.

“Many of the people in formal employment are enrolled by their employers in pension schemes and upon retrenchment or resignation are entitled to the contributions they made into the scheme. In some instances if the contributions made into the scheme were matched by the employer it is also possible to claim a percentage of that as well,” he said.

Mr Ngugi advises that such amounts could also be transferred to asset financiers with pension schemes registered by the Retirement Benefits Authority and a draw down taken against it.

“This will allow you to take an income from the pension fund while it is still invested,” he said.

Before you plan to switch jobs in search of greener pastures ensure that you have a strong financial buffer that can last up to six months without your salary.

“If you save your money in a fixed deposit account and what to access it to supplement your lost income before the maturity you are likely to face penalties and even loose the accrued interest. You would rather invest in the money market fund and use the monthly interest to meet your financial needs,” he explained.

For those planning to jump ship, he says they need to ascertain that they have fully secured the other position.

“If you are dependent on just your monthly income save as much as possible for events like this which you might not have anticipated. There is no point in having idle money, put it in a place where it can work for you with good returns,” he advised.