Loss of income refers to a situation in which one gets deprived of the ability to make money, and we can no longer cater to their expenses and pay bills.
The stress of losing an active source of income can keep you up at night. Its effects are always detrimental and can lead us to debt and impoverishment. It is why one must learn how to protect themself from the possibility of total loss income and the devastating effects that follow.
This article dives into the five most common events that lead to income loss and explores how we can prepare for each.
Also read: Every Employee’s Nightmare: Loss of Income
Career threatening injuries and illness can put you out of work for years, and sometimes for life. It is one of the most unexpected ways a person can lose their source of income.
We have all met people involved in grisly accidents that left them disabled, in crutches or wheelchairs and unable to work. Or those who suffer from a chronic illness that has left them bedridden, barely able to do anything for themselves.
When this happens, some employers can give you sick paid leave. But there is only so long they can keep you on their payroll; they will have to let you go after some time. And you will be left in the cold, with no active source of income, hospital bills to pay, and unable to work.
The best way to prepare for a loss of income brought about by accidents or illness that makes you unable to work is to have your insurance in order. It would be best to buy insurance policies that you can claim when in that scenario. Some of the policies we recommend are;
Also read: Why You Should Diversify Your Income
Retrenchment happens when your employer finds you redundant for whatever business reason. It can be because your services are no longer needed or they are trying to cut costs of running their business. Under the Kenyan Employment Act, the employer has to pay an employee declared redundant severance pay at the rate of not less than fifteen days' pay for each completed year of employment.
Termination happens when you get fired. It can be because of incompetence from your side, other violations or generally mostly justifiable reasons from your employer’s point of view. Either way, you lose your source of income.
Also read: 7 Ideas to Diversify Your Sources of Income
Retrenchments and termination are the typical way most people lose their source of income. That is why it is always advisable to be prepared for it. The best way to do it is to improve your employability status by:
The company that your employer runs may not always stay afloat. Poor management, poor financial decisions, and outdated business models, among other causes, can cause their business to fail and force them to declare bankruptcy. It will immediately cut off your source of income.
With the dire economic situations countrywide, businesses are at a considerable risk of failing and eventually going bankrupt. When this happens, employees suffer the most. Here is how you can prepare yourself for such a scenario.
Improve your employability: You can do this by increasing your level of education and earning certifications most relevant to the prevailing and future labour demands of your field. It will cement your expertise and show prospective employers you are someone up to date with what the market requires.
Create a Solid Network: When your employer goes belly up, and you are looking for a new opportunity, the people you contact first will be those within your network. They're the people who will be able to find you new openings, and they can vouch for you.
They can only help you if prior to losing your job, you actively engaged with your networks and created strong ties - you should do this so well such that when your name pops up, they can easily tell what you can offer.
These are events that are completely unforeseen. They can be an unexpected natural event like the COVID-19 pandemic - the war in Ukraine, or the recession of 2008.
If the last two years have taught us anything, it is that we can lose our source of income in a blink. At the height of the pandemic, it was reported over 1.7m Kenyans lost their jobs - in three short months.
Without the right cushion, sudden occurrences can have devastating effects. It can lead someone to debt and, worse, poverty. These two strategies, if done well, can help you pick yourself up when faced with a loss of income;
Retirement is the ultimate loss of active income for all employees. It is unavoidable. It is the loss of income that everyone prepares for all their working years.
We all want to spend our retirement life in peace, not worrying about money. This is why we must take extra measures to protect ourselves when we are old and unable to work. Here is how to do that;
Loss of income is a jarring experience. This is why we must always be prepared for it. Without preparation, we risk making hasty decisions that can ripple the effects of income loss - causing us more problems.
We might not be able to prepare for every one of the events mentioned above, but preparing for two or three, puts you in a better position to deal with the loss of income when you experience it.