Loss of income can happen to any one of us. It happens when we least expect it, out of the blue.
It can happen to you when you are prepared for it by having your investments and savings in order, and it can happen when you are unprepared and barely have your finances well set.
What do you do after suffering a loss of income after a decade or so of working? This article dives into the options available to you, depending on the situation the loss found you in. We will explore the options available to the prepared and the unprepared person.
Also read: Every Employee’s Nightmare: Loss of Income
The Prepared Person
If you are this person, you haven’t been caught off guard when you suffered a loss of income. The prepared person is someone who has their finances in order. After ten years of working, you have sizable savings stashed away, and your investment portfolio is impressive. Additionally, you are adequately insured.
Also read: Rising Inflation: Where Should You Keep, Invest Your Money?
When you lose your income source at this point, there is no need to panic. All you need to do is to check you have at hand, re-group, and reset. Here is what you can do:
- Revamp Your Resume: As a prepared person, you might have invested in your education and got a postgraduate or a master's degree to increase your employability; add that and highlight your achievements and the experience you’ve gained over the years you were employed. With this, get yourself in the market and start applying for jobs. You can also utilise your rich network to try and land a job faster.
- Check on your Emergency Savings, loans, and investments: The emergency fund you have been saving after years of employment will come in handy when you lose your income. You will need to create a budget in line with these savings. If you are paying off a car loan or a mortgage, you will need to talk to your lender to lower your monthly repayments and increase the payment window. You might also need to liquidate some of your investments to pay off debts with high interest.
- Claim Your Insurance: One of the best ways to prepare for a loss of income is to have your insurance in order. Depending on how you lost your income, you can claim your disability, income protection, health, or even term insurance. Insurance can play a big part in helping you get back on your feet faster.
- Scale your Passive Income: This is the time to remember the side projects you started when you were still employed to make extra cash. Since you probably have more time on your hands, this could be the perfect opportunity to scale those streams and turn them into a business.
- Create a business: You have probably been thinking about venturing out on your own after years of employment. Depending on your expertise, you can start a consultancy firm and use the vast experience you have amassed in helping others and getting paid to do so. You can also choose to create another form of a one-person business.
Also read: What Is the Rule of 72 and How to Use It When Investing?
The Unprepared Person
Sometimes the inevitable find us completely unprepared. We’re unprepared for a loss of income when we don’t develop a good financial mindset and have control over how we spend our money, despite making reasonably good wages.
If you lose your source of income and you are not very well prepared financially there are still ways you can cushion yourself from its devastating effects.
Let's discuss what you should do if you find yourself in such a scenario:
- Get Personal Finance in Order: This will serve as a rule of thumb after working for so long with nothing to show for your efforts because of either reckless financial decisions or other eventualities beyond your control. To do this, you will have to create plans on how you will generate income, pay off debts, get out of your current situation, and avoid the same predicament in the future.
- Get short-term work: With no income and no emergency savings, you'd need to find a way to help yourself in the short term. You can start freelancing depending on your skillset. For instance, if you are an accountant, you can offer bookkeeping services remotely to clients on platforms like Upwork or Fiverr. These jobs will help you stay afloat as you figure out how to get out of your situation.
- Utilize Your assets: Find a way to generate extra cash using your assets. For example, you can use your car to offer Taxi Services by signing up for Uber or Bolt. If you have a piece of land lying idly in the countryside, you can rent it out to a farmer.
- Get assistance: This shouldn't be just about getting help from family and friends to pay your rent or your kid’s school fees. You can contact your networks and get their help securing your next job. You could start public fundraising if you lost your income due to illness. People are always willing to help.
- Sell off your assets: You might have to take this route for a couple of reasons if you suffered a loss of income while unprepared. One reason could be to settle massive bills, like hospital bills, if you lost your income due to illness or injury. Another is you might be deep in debt, and lenders have come knocking. You can also get rid of depreciating assets like a car and use the money to start a small business to generate new income.
Also read: 7 Ideas to Diversify Your Sources of Income
Losing an income can be very devastating, and as we have found out, it is a phenomenon that can happen to any of us. What we can do when it happens to us and how we emerge from it will be dictated by how well we were prepared.
Dealing with a loss of income is a demanding job; you have to approach it with the right mindset. Any mistakes you make when dealing with it can potentially broaden the problem and make your already bad financial state worse.