Today’s economic climate dictates that businesses need to become leaner and more cost-efficient to survive in a competitive environment. Many government institutions also have to regulate their operations to ensure that they can make the best use of limited resources.

When the owners or managers of these organisations decide that they need to reduce expenses, they will often look first to their employees. Staff-related costs can be a significant portion of an entity’s budget, so cutting the wage bill can usually benefit the bottom-line.

While a business owner or management official may justify the advantages of reducing the staff component, the workers may see things differently. A decision to lay off people may be seen as unwarranted, especially if they think that the organisation is making enough money to retain them.

Is your job in jeopardy?

Whether you agree with the management’s stance or the employees’ viewpoint, the reality is that the employment landscape has changed. More positions will be downsized in ensuing years, so if you are currently employed, you should prepare yourself for the possibility of job loss.

If you believe that your job is at risk, or if you have already received the dreaded termination notice, you need to have a plan to recover financially. Your objective is to work out some practical steps that will allow you and your dependents to survive while you try to obtain new sources of income.

Losing a job can be a traumatic experience for most persons, but you have to focus on your future instead of painfully dwelling on the past. To accomplish this, you need to be brutally honest with yourself about the state of your finances, so that you can make some pragmatic decisions.

How will you cope?

Your first step is to create a budget which will allow you to understand the true cost of the lifestyle that you have been living. A budget will help you to focus on your absolutely indispensable expenses and decide which costs can be reduced until you get back on your feet.

Preparing a detailed budget will also help you to know how best to allocate any redundancy payments that you might receive. Another benefit of doing a budget is that it will allow you to see exactly how much money you need to target to earn from your future job or business venture.

In previous columns, we explained the process of preparing a budget; you can download a spreadsheet at financiallysmart.org to guide you. After recording your daily, weekly, monthly and annual expenses, circle the essential bills and cross out those costs that you can eliminate for now.

How should you handle debt?

If you have loans or other monthly obligations to pay, you need to minimise or reschedule these payouts until you find another income source. If possible, pay off your loans with your redundancy payment, as long as you have enough money left over to pay basic bills for at least six months.

You can also ask your creditors to renegotiate your loan period or provide a payment moratorium. Some lenders, such as hire purchase companies, have insurance protection, while others may give concessions for persons who have been laid off, so be determined in your efforts to get assistance.

If the above options are not feasible, you may have no choice but to liquidate some of your assets to get rid of debt. You don’t want to be pressured by angry creditors calling for money at this time, so it may be necessary to sell some of your possessions and use the proceeds to pay down the loans.

What should you do with your money?

If you are fortunate enough to be debt-free, you can save or invest most of your redundancy cheque. Since a good portion of the money may be needed to pay your monthly bills, place the funds on a 30-day deposit or short-term money market account at a licensed financial institution.

Given the low interest rates now being offered, it is unlikely that you will earn enough money each month to pay your bills, so be resigned that you will have to deplete these funds to survive. Don’t be tempted to jump into a risky venture in the hope that you can make a higher return.

If you have excess funds or a steady source of income, then you may look at longer-term options for your payout. Don’t make any hasty decisions; have clear objectives what you want the money to do for you, and seek advice from investment professionals who can help you to design a plan.

Do you have to wait for another job?

While you may think this is an opportune time to go into business for yourself, be cautious about taking the plunge to start a business if you have never done anything entrepreneurial before. With the high failure rate for new enterprises, you may end up losing all your funds instead of making a profit.

Even if establishing a business is not a good fit for you, being laid off can help you to learn how to create independent income. Your hobbies and talents could be utilised to make money, once you know how to market them. Next week, we will look at how you can identify opportunities to earn.

Copyright © 2015 Cherryl Hanson Simpson. No reproduction without written consent.

Originally published in The Daily Observer, October 29, 2015.

DON’T MISS MY NEXT ARTICLE! CLICK BELOW TO RECEIVE IT IN YOUR EMAIL:

Cherryl is a money coach and business mentor, and founder of Financially S.M.A.R.T. Services. See more of her work at www.entrepreneursinjamaica.com and www.financiallysmart.org. Contact Cherryl