Lost your job? Here’s how to build a financial safety net before you need it | Layoff | Savings

[00:00:01][music] >> Imagine waking up tomorrow and finding out you have lost your job. Your salary stops, but your rent, EMIs, and bills [music] don't.

[00:00:13]How long could you manage without a paycheck? Most people don't know the answer.

[00:00:17]>> [music] >> That's exactly why every financial planner recommends having an emergency fund. So, let's understand how to build one. [music] The first step is figuring out your survival number. This is the amount you need each [music] month to cover only your essential expenses. That includes your rent, EMIs, [music] groceries, electricity bills, insurance premiums, and other necessities.

[00:00:41]Leave out discretionary spending such as food delivery, streaming subscriptions, [music] and weekend outings. For example, if you spend 50,000 rupees a month, but 20,000 goes towards lifestyle [music] expenses, your survival number is 30,000.

[00:00:54]Financial planners generally recommend building an emergency fund [music] worth at least 6 months of essential expenses.

[00:01:00]Why? Because finding the right job can often take several months.

[00:01:04]A financial cushion gives you the [music] freedom to search for the right opportunity instead of accepting the first offer out of desperation. [music] A 6-month emergency fund may sound overwhelming, >> [music] >> but you don't have to build it overnight.

[00:01:19]You can start by setting up an auto debit for 5 to 10% of your salary as soon as you get paid.

[00:01:25]As your income grows, increase that amount gradually.

[00:01:29]Small consistent contributions can eventually become the financial cushion that helps [music] you get through difficult times.

[00:01:38]An emergency fund should be easy to access whenever you need it.

[00:01:42]>> [music] >> That's why experts advise against keeping it in stocks, crypto, or other investments whose value can fluctuate sharply. Keep enough money in a separate high-interest savings account for immediate emergencies. You can park the rest in highly liquid options such as short-term fixed deposits or liquid mutual funds which generally offer better returns while remaining relatively easy to access.

[00:02:03]Remember, [music] an emergency fund is meant for genuine emergencies such as job loss, medical expenses, or urgent home repairs, not [music] holidays or impulse purchases.

[00:02:16]The right emergency fund also depends on your circumstances. If you're early in your career and have no dependents, clear high-interest credit card debt first.

[00:02:26]Then build a 3-month starter fund before expanding it to 6 months. If you're married, paying a home loan, or have children, many financial planners recommend [music] increasing your buffer to around 9 months to cover EMIs, school fees, and other family expenses. [music] You should also have an independent health insurance policy because your employer's cover usually ends when your job does. And if you're self-employed or have an irregular income, consider building an emergency fund that can cover up to 12 months of essential expenses. You may not be able to predict a layoff, [music] but you can prepare for one. A strong emergency fund can give you the time, confidence, [music] and financial stability to navigate unexpected setbacks without compromising your long-term goals. Follow Business Standard for more such [music] deep dives.