Your employment can give you a sense of security with your finances as you are certain about the money coming in each month that will cover your expenses and basic needs. This is why if you currently have a job, it is best to hold on to it and do everything possible to keep it. Otherwise, you may run the risk of facing the difficulties linked with losing a job, which can mean bad news to anyone. But then again, there are instances when a shock layoff just happens, thus leaving people lost and completely unsure of what to do to get back to their feet. They may rush to moneylenders Singapore PRs and citizens go to for their financial concerns or take out a personal loan Singapore banks offer, even if the interest rates may be too high for them to afford. The insecurity of not having a source of income prevails, so they resort to choosing a reputable bank or a licensed money lender in Singapore to support their need for extra cash to cover their basic needs and other expenses.
Also, people do some impractical things upon retrenchment, which only do more harm than good to them. These can even hurt their financial situation even more, and there is the risk of not being able to bounce back quickly after a serious downfall. So, to spare you from these situations, it is best to look into these common mistakes committed by people during retrenchment.
1. Liquidating Assets Right Away
The shock of losing a job causes people to overreact and do things that they end up regretting afterwards. They tend to liquidate their assets immediately such as selling their unit trusts or pulling cash from their fixed deposits. Unfortunately, doing so may lead to further loss or even sacrificing the accrued interest that can be harder to deal with in the long run. Even endowment policies that they may have are quickly sold off prior to reaching the maturity. Thus, more money is lost along the way. Downsizing their home and accepting offers under valuation are also common mistakes that they make just to receive cash the soonest possible.
But there is no need to go through these things if you are not even certain about what you are planning on doing. It may be worth consulting a financial planner for the best plan of action to take if you are looking into selling your assets off. For instance, you may want to liquidate your blue chip stocks just to cover the initial month’s worth of expenses. Next, you may proceed to selling your unit trusts during the second month, if you still have no source of income during that time. Cashing out your savings bond is one of your last moves.
Always remember that if you sell everything right away all in one go, there is a HUGE possibility of losing more since the asset may be sold at a much lower price than what you bought it for. Just imagine if you end up landing on another job a month or two later, and then realizing that your savings were enough or more than what you need, anyway. This could mean so much regret on your part since you have only hurt your retirement fund and wasted it all for nothing.
2. Use Up Your Savings
Some people become too depressed after a loss of a job and just spend everything they have because they feel that nothing matters to them anymore. This is certainly a serious mistake since having less money is surely better than not having money at all. The initial response you should have is to save what you still have. If you have no more cash left at all in the bank, accumulating high-interest loans and debts can further cause you financial concerns. It is like digging your own grave!
Always remember that if you are unable to settle your debts as you search for a new source of income, then at least try not to accumulate more debts along the process. It will only end up badly for you if your credit rating is already ruined and there is no regular job or steady income that you can count on.
3. Not Negotiating Loan Payments
Are you currently working out a monthly loan repayment plan? If you suddenly lost your job, then it can be very tough to continue making payments for your debts without a good source of income. You may even be up for years of servicing the loan, only to realize that you are unable to keep doing this. Paying off your loans and compromising your health do not make sense, as well, since this can even impact the well-being of your loved ones if you are breadwinner of the family.
If you are sure about not being able to service your bank loans for more than a month or two, it is important that you approach your bank or even a credit counselling service for assistance. There are banks that can provide their clients with a way to restructure debts, as long as there is an advance notice given to them. A DCP or a Debt Consolidation Plan may be offered by some banks, which means combining several debts into a single loan while reducing the interest rate at the same time. By going through this option, you can minimize the damage on your credit score if you show proofs of repaying your debts. Thus, avoid waiting until it is too late for you to obtain a reasonable loan repayment scheme with your bank. Remember that you are at risk of being under a ton of debt, which may take several years for you to pay off.
4. Never Let Your Insurance Lapse
Perhaps because of zero income coming in, you are unable to pay insurance premiums. But the more should you be insured when you do not have a job since you can never tell when accidents may arise. With little money in your savings, you should make it a point to be insured. In case the issue is with keeping up with premium payments, you simply need to contact your financial adviser for a back up plan that works for you. For instance, there may be a cheaper plan available that is still much better that having no insurance at all. This will help in times of emergency, along with the possibility of obtaining a premium holiday, depending on your insurance provider. But the main thing is to never let your insurance lapse. A single medical emergency can make a massive different on your financial situation, which may impact you permanently.
5. Taking an Asset-backed Loan
Perhaps you have a private property that is already fully paid, and you are thinking about borrowing money against it because of a low interest rate. This is probably not the best way to go since it may be worth checking your savings and thinking about how long this may last you. In case you have a good amount that should suffice for a period of 3 to 6 months, then there may be another income source coming in even before the money runs out. Simply because of the possibility of borrowing 50 percent of your current home value, this does not mean that you should do this right away if it is not even urgently needed.
You see, acting on impulse is common among people when they suddenly lose their job. They look for ways to quickly regain control of their finances, even if it means selling their assets to liquidate them or even using their credit card even more for their purchases. But by avoiding getting into more debts and fixing your loan repayment plans, you can bounce back even after facing a big loss. Just think about your next plan of action carefully to avoid doing things that you will only regret massively in the long run.