One of my very close friends has just lost his job. Some others have experienced a cut in their salaries. Now what? What's your advice for them?

One of my very close friends has just lost his job. Some others have experienced a cut in their salaries. Now what? What's your advice for them?

A. Let's accept these two things asap - first, this is no small thing, it's a big setback, it's terrible, it's shocking and it's difficult to digest; second, it's not the end of the world! 

The situation could be different for different people. If your financial life is already sorted out, then handling things would be much easier for you. Here, by 'sorted' I mean - you've saved well; you have kept enough money in your emergency fund; you are having zero or very less liability and you're well insured. 

If the above things aren't telling your story, then things would be difficult for you to manage but again -  not impossible. The below set of advice may be proven useful for both - financially sorted life or not.

(1) Stop all unnecessary cash outgo wherever it's possible. Cut down on lifestyle expenses heavily. Even little things may matter here, e.g. check out all those subscriptions that you had taken once on impulse but now hardly consuming - stop paying for them. Check your bank and credit card statements of last 3 months thoroughly.

We have been discussing the aftermath of a job loss or salary cut in the current situation. The first immediate step is to control cash outgo wherever possible. What's next? 

A.  (2) The next major worry is managing outstanding liabilities if any. Talk to your bank or finance company if you can get any moratorium period, in case you are not in a position to pay regular EMIs. If you can pay EMIs, then pay for it. If you have credit card outstanding or other high-interest-rate loans, then on a priority basis - pay them off. If you need to liquidate your savings or borrow from close relatives/friends for that, then also be it.

(3) Next comes - what to do with your ongoing SIPs and insurance premiums. In case of SIPs, don't stop them but instead go for a 'pause' for the next few months if your current financial state doesn't allow you to continue with your SIPs. 

Most of the insurance companies are offering extended 'grace period' during the lockdown. Check with your insurance company how long you can delay the premium payment without your policy getting lapsed. Please note, that though life cover continues during the grace period, the same is not true for health insurance policies.