Pay cut or job loss amid Covid-19? Quick tips for managing your savings and money


The Covid-19 pandemic followed by a nationwide lockdown has led to massive layoffs and pay cuts leaving employees powerless. An unexpected turn of events has worsened the plight of people, especially those who do not have a well-prepared financial plan that takes into account such a crisis. Here we offer you some options that you can use to get through these difficult times.

People facing job loss –

Fixed income investments – Debt funds, fixed income investments in recurring deposits, or term deposits that do not have a significant financial goal can be redeemed. Since the returns generated by these fixed income investments are generally lower than the long term returns. Although repayment of recurring deposits before their maturity may result in a prepayment penalty and would also lead to the risk of capital erosion.

EPF Corpus – To provide some relief and support to employees facing disruption to their income, the government has allowed EPF subscribers to buy back their allowance or 75% of their EPF balance for a period of up to three months. But it is advisable to opt for the EPF subscription only if the existing bond investments are not sufficient to exclude income disruptions. Indeed, withdrawal from EPF may affect post-retirement security.

Convert Credit Card Dues To IME – People with credit cards, who are unable to repay their dues, can convert their delinquencies to IMEs. Compared to finance charges on unpaid credit card bills, the interest rate charged on these EMI conversions is much lower. The reimbursement for EMI conversions is up to 5 years, allowing cardholders to reimburse the full amount in small installments based on their financial capacity.

Relief measures under the RBI resolution – As a relief measure for existing borrowers, who have been affected by the Covid-19 pandemic, RBI has introduced some guidelines. Individual borrowers, who did not take advantage of loan restructuring programs announced last year, were allowed to perform a one-time loan restructuring before September 30 of this year. This scheme can be used by people whose loan accounts were classified as “standard” on March 31, 2021. And who have arrears of Rs. 25 crore.

Emergency fund – The purpose of an emergency fund is to cover critical expenses resulting from job loss or other reasons, including illness. This fund must be able to meet major or rather unavoidable expenses for at least 6 months. People who don’t have emergency funds should prioritize building one for future needs. This fund should be placed in high yield savings accounts so that instant withdrawal is easy.

Loans – When approving loans, lenders take into consideration the repayment capacity, job profile of the applicant. Due to the raging pandemic, banks and NBFCs have become very demanding in granting loans. Therefore, people working in industries that have been affected by COVID-19 will face serious challenges. Gold loans, property loans and title loans can be considered to eliminate financial deficits. Comparatively, lenders are more comfortable providing these types of loans.

Adequate health insurance coverage – The COVID-19 pandemic has highlighted the need for adequate health insurance coverage. One instant of hospitalization can put an end to an individual’s life savings, making it difficult to meet future expenses. People covered by employer-provided group health insurance should also purchase another health insurance policy.

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