In an ideal world, everyone would have six to twelve months’ worth of living expenses saved in their account as an emergency fund. This, though, is not a luxury most people have and even had before the pandemic hit Trinidad and Tobago. The last year has been financially difficult for most people and especially those who have lost their jobs. There are, however, measures people can take while unemployed to ensure that they make the most out of what they have.
Here are some money management tips while unemployed:
- Know Your Severance Entitlement
Severance will differ based on various factors such as the years the employee worked at the company and the business’s bargaining agreements. However, in Trinidad and Tobago, the Retrenchment and Severance Benefits Act sets out a minimum payment, which includes:
“Two weeks’ pay at the basic rate for each year of services for workers having completed more than one year but less than 5 years of continuous services; and three-weeks’ pay at the basic rate for the fifth-year ad for each succeeding year of service where workers have served the employer five years and more”
- Prepare a “bare-bones” Budget
Once you have a figure to work with based on your severance and savings you can then decide how to stretch this figure over the following months.
- Firstly, list your current monthly expenditure and base this on your lifestyle before being unemployed. Be as realistic and accurate as possible. Include everything, even the small expenses so that you can paint an accurate picture of your spending.
- Then create a budget by dividing your expenses: divide this into 3 main categories:
- Fixed Expenses: rent, mortgage, loan, insurance, utilities.
(Note: It is important that you continue to pay these bills as falling behind on them could place you in a worse financial situation later on.)
- Expenses with Room to Trim: entertainment expenses, eating out, groceries (you can revise your grocery list with cheaper options)
- Expenses you can Suspend (not cancel): pension, annuity contributions, monthly savings plan
- Set Up Interim Arrangements with your bank and Insurance Agent
- Bank: you can ask your bank for an interest-only payment arrangement on your loans or mortgage which can go up to 3 months. However, if that is not possible, you should maintain your monthly payments.
- Insurance: ask your insurance agent if your life insurance monthly premiums can be paid from CSV (cash surrender value) or premium waiver riders for at least 3 to 6 months. You should not, however, allow your life insurance to lapse.
- Annuities/Pensions: these can be suspended, and they will not lapse like insurance policies however, it is important NOT to cancel or cash out. It should just be a temporary suspension until you can afford to pay them again.
- Resist the urge to “take a rest”
You must start your job search and research into other income-generating options as soon as possible. Use this time wisely and if you feel that it is necessary to take a break then try and take no longer than a week. During this time, you should also think about your career and whether it is worthwhile to look into entrepreneurship or a career change.
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