After completing his undergraduate degree in Business Administration in March 2019, James was quickly absorbed into the workforce. He was employed by a multinational hotel franchise for an entry-level management job. He had previously interned at the hotel. James was ecstatic; his future looked bright. He was making enough to live a lavish lifestyle and support his parents in paying for his sibling's education.
Six months later, James received a 20% salary raise. He had also saved enough, so he decided to buy a car on hire purchase terms. He used his savings as a deposit for his brand new car and rode off into the sunset. James didn’t have any savings now and used over 50% of his salary to pay off his car loan.
In early 2020 all hell broke loose. As the pandemic ravaged the world, the hotel franchise James worked for downsized, eventually declared bankruptcy and closed its doors. Overnight, James was jobless, had no savings, and had no way to service his car loan. All was lost in a blink of an eye.
Every adult takes pride in their ability to provide for themselves. We wake up and go to our jobs so that we can generate money to support our lifestyles and live fulfilling lives. Loss of income refers to a situation in which we’re deprived of that ability, and we can no longer make money to cater to our expenses and pay our bills.
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The possibility of loss of income is a nightmare every employee has to live with. Whether we are prepared for it or not, loss of income can happen to anyone. Let us discuss five ways it can happen to you:
Also read: Why You Should Diversify Your Income
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The scenario in which you are in when you suffer a loss of income will define how you will mitigate its effects. We will examine the three most possible scenarios loss of income can find you in from a financial standpoint:
Also read: How to Manage Your Money in Uncertain Times
Learning how to protect yourself from the nightmare of losing your income is a survival tactic every employee needs to know and perfect. Let's now dive into how you can protect yourself from loss of income:
Also read: What to Do When You Don’t Make Enough Money
Improve Employability: You can advance your education and skills by getting that postgraduate degree and being more motivated as employers lookout for such qualities. You can improve your soft skills like communication, critical thinking, and problem-solving ability.
Save, Save, Save: This might sound cliche, but saving is one of the best ways to protect yourself from a loss of income. Your savings will help you pay your bills while you scramble to get a new job.
Also read: 11 Ways to Save Money Without Driving Yourself Crazy
Start Investing Now: You might fear investing because of the risks associated with it, like losing your money, but nothing supersedes the fear of losing your source of income. Get a financial planner to help you identify low-risk investment strategies to get you started. Your investments can be a secondary source of income that can come in handy, especially after retirement.
Get Properly Insured: Nothing is more beneficial than insurance when it comes to protecting oneself. Insurance can play a big part in your life after you lose your source of income. Some of the insurance policies you should have are:
Loss of income can be detrimental to employees. As we have seen, it can drive you into debt and bankruptcy. And no one is immune. It would be best if you took some of the measures we have highlighted to protect yourself should you ever find yourself in such scenarios.