The coronavirus pandemic has become a war – Humanity vs the virus. Humanity has suffered massive damages in battle after battle. The lockdown has left millions of people jobless. Poor migrant workers are walking hundreds of kilometers with their children and luggage to reach home. Small businesses are struggling to survive. A job loss in this coronavirus crisis feels like the end of the world.
The paycheck has stopped coming in. The expenses are still there. You still need to put food on the table. The possibility of finding a new job is scarce. It would take a long time before business gets back to normal. And the thought of someone in the family falling sick while you are still looking for a job gives you goosebumps.
It’s one thing to quit your job. You are in control of the situation. You probably have a better option, or intend to take a break.
It’s entirely different to be laid off or forced to resign. It not only affects your financial well-being, but also emotional and social well-being.
A job loss amid the coronavirus crisis brings with it the risks of depression, anxiety, low self-esteem, and even suicidal thoughts. According to German researchers, the longer you remain unemployed, the more likely you are to feel depressed. And the coronavirus has significantly increased the chances of long-term unemployment for millions of people.
Here is how we can cope with a job loss in the coronavirus-caused economic crisis. I could soon find myself in the same boat as millions of others. So, this essay is as much for you as it’s for me.
1. Accepting the reality
You are experiencing great mental anguish. It’s one of the most difficult times of the last century. The coronavirus crisis has forced hundreds of millions of people to lose their jobs or businesses. You are not alone.
It’s natural for you to grieve. But you can’t keep grieving forever. The faster you accept the reality, the quicker you’ll be able to plan your finances and look to the future.
The longer you brood, the worse it will get…not just for you but also for your spouse and children. Talk to the people you love. Sharing your thoughts and emotions with your loved ones will ease your pain.
Accept the fact that the next few months are going to be difficult – monetarily as well as health-wise. You have to keep your family safe and healthy while you look for a job or get your business started again.
Accepting the reality makes you look forward instead of ruminating over what has happened. There is no going back from here. Only moving forward with what we have got.
“The soul of a free man looks at life as a series of problems to be solved and solves them.”The Richest Man in Babylon
2. Working out your finances
I hope you have two things – an emergency fund to cover your expenses through tough times, and insurance. And one thing you should not use at all – credit card. If you don’t have a sufficient emergency fund and you are among fortunate ones to still have a job, start building one right now.
If you don’t have adequate health and life insurance, get it at the earliest. You don’t want to fight a two-front war: a job loss on one side and a coronavirus infection in the family on the other side.
Things could be a little easier if you have a working spouse, who hopefully is still employed.
Now it’s time to take a hard look at your finances. List all the money you have in household savings and income. Put those cold, hard numbers on paper. Then list all your monthly expenses including rent, EMI, food, transportation, children’s education, etc.
Next, ruthlessly cut all the expenses you can. The point is to spend bare minimum until you find a job.
If you have emergency savings to cover three months of household expenses, see if you can stretch it to 4-5 months by cutting expenses. The goal at this point is to have the maximum runway. Call or visit your bank and negotiate a temporary relief on EMI payments.
The Great Lockdown has already dramatically reduced our household expenses. It’s up to you to decide what more expenses can be avoided or delayed.
If you have to, stop your mutual fund SIPs. When you don’t have an income, your focus should be on conserving cash rather than buying the dip. But avoid selling your mutual fund investments in a down market.
Stop using your credit card! I can’t repeat this enough. Credit cards seem enticing because they let you defer the expenses by a month or two. You feel like it gives you a longer runway.
But you don’t have an income yet, and you don’t know whether you’ll be able to pay off the credit card balance in full month after month. Without a steady income, you could be forced to pay both the principal and a ridiculously high interest, which will only worsen the situation for you.
3. Dealing with social anxiety
We live in a society where our work is our identity. I’ve been asked “What do you do?” dozens of times in the last year alone. If you’ve been out of job for the last few weeks or months, a sense of “shame” and “embarrassment” starts creeping in your mind.
You avoid meeting (even virtually) and talking to your friends. What would you tell them about your current situation? People will judge you. After all, it’s common for people to think that companies lay off only non-performing employees who contribute little to the organization.
Your career and who you are as a person are two entirely different things. You don’t have to attach your self-esteem to your career. Your career might have suffered a setback, but your self-esteem shouldn’t.
We need our social connections to survive. Take a small step. Just a quick WhatsApp chat with the friend you trust the most. Maybe you can call another friend tomorrow. Or maybe sign up for a virtual class or yoga session the day after.
4. Filling the day
Work used to occupy 8-12 hours of your day. And now you have to fill that void. How are you going to fill your day for the next several weeks or months? Just thinking about it could drive you crazy.
Set aside a fixed amount of time every day for four things:
- Looking for the next job or business opportunity
- Upgrading your skills
- Working out
- Reaching out to your friends and colleagues
- If you still have some time left, help someone…contribute something to the community.
You don’t want to come out of the so-called “quarantine days” all fat and chubby. Do some push-ups, sit-ups, crunches, jogging, and other workouts to stay fit. And stop filling your body with all that processed, packaged, and toxic garbage.
Take that course you’ve always wanted to take. Acquire a new skill. Heck, look for some freelancing opportunities to make some money. The gig economy is only going to gather pace from here. Take advantage of it.
After losing the job, it’s natural for people to think I’m a failure. I’m not going to get a new job.
Before you apply for even a single job, take a pen and a piece of paper and write down all the reasons why someone should hire you. I know you know about your skills, experiences, and capabilities. But still put it down into words. Your education. Work experience. Skills. It will make you feel more confident.
Living in the Post-COVID world: Being prepared for the next crisis
We are desperately waiting for the day when coronavirus becomes history. But we still don’t see a light at the end of the tunnel. The number of cases worldwide continues to rise.
But I’m optimistic that we’ll overcome this health and economic crisis. We just have to stay strong – both physically (to fight the virus) and mentally (to survive the tough times).
We are learning some hard lessons from the coronavirus crisis – about ourselves, the economy, the job market, and more. In the post-COVID world, we will obsess ourselves more with financial security, job security, and personal hygiene.
We will once again anticipate an economic crisis, and hopefully we will be better prepared next time. Financial crises are an essential part of the economic cycle, though the severity and duration of crises may vary.
We don’t know when the next crisis would hit. Nobody predicted in December 2019 that the year 2020 everyone was so excited about is going to be a nightmare. So, we should always be prepared for the next financial crisis.
The best time to prepare for a financial crisis is not when the crisis is just around the corner or when we are in the middle of one. The best time to prepare is when the economy is booming, you are getting handsome salary hikes or promotions, and jobs are abundant.
Step-1: Prevent your ship from sinking again
We’ve experienced first-hand that in an economic crisis of massive proportions, every individual faces the risk of losing jobs. Every business suffers a revenue and profit decline.
If we don’t have an emergency fund parked away for an event like this, our ships are highly likely to sink.
Having an emergency fund to cover 6-12 months of our living expenses can help us stay afloat. It also prevents us from making stupid decisions. Many people with no emergency fund, huge debt, and a family to feed are tempted to commit suicide.
If you have dependents such as children or retired parents, you need a bigger emergency fund to ensure that your dependents are financially secure and protected. And never put these emergency savings in stocks because you could lose 30-50% of it when you need it the most.
Step-2: Stop being a slave to the banks
Banks and fintech companies have made it ridiculously easy to borrow money. And the younger generation has been borrowing like crazy. It’s shocking to see someone earning ₹40,000 a month buying the latest iPhone, 4K television, vacation packages, and even honeymoon packages on EMIs! Our generation is truly f*cked!
The experts will tell you that there are two types of debt – good debt and bad debt. Horseshit! No such thing as good debt exists. There are bad debts and there are toxic debts. There are avoidable debts and there are unavoidable debts. But for God’s sake, stop believing in crap like good debt.
Even if a debt makes financial sense, it will rob you of your mental peace. It will bite you in the ass when your income stops flowing in. People who have low or zero debt have to spend less than those saddled with debt to cover their monthly financial obligations.
If you have any loan other than home loan (most people can’t afford to buy a new home without taking a loan), try to pay it off. Credit card debts and personal loans are the financial equivalent of cancer. Pay them off at the earliest, even if it means selling the stuff you don’t need.
Step-3: Build a side hustle for passive income
One important thing we’ve learned from the coronavirus-induced economic crisis is that we cannot rely entirely on a single source of income. It’s much better if you and your spouse both are working. And it’s even better if you have a side hustle that generates some extra income.
You can build an online business, do some freelancing, or use your skills in other opportunities to generate a side income. Technology is going to disrupt a number of jobs and industries. But it will also help create new opportunities for millions.
Irrespective of what those online gurus tell you, building a side hustle is difficult, time-consuming and challenging. You have to be disciplined day after day, week after week, month after month. You’ll encounter setbacks along the way.
It could take anywhere between six months to three years to build a profitable side hustle. So, the earlier you start building it, the better. Start by listing the skills you have and then think how you can monetize them, whether online or offline.
Having a profitable side hustle is like a Plan B. It gives you peace of mind that if you lose your job some day, you’ll still have a source of income to cover your basic expenses. The side hustle can also help you build an emergency fund and pay off your debts faster.
Step-4: Boost your professional value
Automation, digitization, and emerging technologies will encourage companies to increase their output while downsizing their workforce. Heck, many companies are already achieving more with fewer employees.
You need to constantly upgrade your skills to make yourself more valuable to the organization. The kind of work you do might not stay relevant 5-10 years from now. So, consider adding new training and certifications, learning new skills, and taking new courses.
Or maybe it’s time to explore new job opportunities in a high-demand field. There will be plenty of opportunities in emerging fields in the post-COVID world when the economy is in good shape. The best time to change jobs and explore new opportunities is when the economy is booming and employment rate is rising.
Step-5: Test your retirement thesis in a bear market
At least once every decade, the stock market delivers stellar returns. The kind of returns that make even clueless idiots feel like market wizards.
A lot of people see their investments hitting new highs. And they think they have enough money to quit the job and retire from the rat race.
I’ve read or heard about dozens of people who retired after the massive bull run through 2017. They thought the bull market would never end. But bulls and bears are part of an economic cycle.
The stock market disappointed the newly-retired investors in 2018 and the market performance was not very good in 2019 either. Then came COVID-19 in 2020. Now most of those who retired around 2017 are looking for a new job.
If you are nearing your retirement age or you want to retire early, test your retirement thesis in a bear market. Live through a bear market to see if your retirement corpus and asset allocation can weather the bad times without triggering your panic button.
If you don’t want to wait until a bear market, just calculate how much money you’ll need to retire comfortably and then multiply it by 1.5. That’s how much you really need because your equity assets could lose half their value in times of an economic crisis.
Step-6: Prepare to take advantage of the next economic crisis
We’ve heard and read Buy low, sell high a gazillion times. But we are rarely prepared to take advantage of such opportunities to create long-term wealth.
Even during the coronavirus crisis, the stock prices have fallen to attractive levels, and could fall even more. But hundreds of millions of people are left without jobs. Thousands of businesses have been temporarily shut down. So, the focus of the affected people shifts from taking advantage of the situation to meeting their immediate needs.
To buy high quality stocks at attractive valuations during the next economic crisis, always keep some spare cash. Remember that this extra cash is part of your investment portfolio, not your emergency fund. Don’t ever touch your emergency fund unless, well, there is an emergency.
How much cash should you keep for such opportunities? Warren Buffet had more than $125 billion at the beginning of 2020. He has been building up his cash reserves for the last few years, waiting patiently for an economic crisis. He likes to buy great businesses at attractive prices.
If you keep too much cash, it will be earning relatively lower long-term returns than what the same money would have earned in the stock market. You’ll lose out in the opportunity cost because the market often goes up significantly before falling in a bear market.
I like to keep no more than 5% of my portfolio in cash, and invest it when I find an attractive opportunity. I started investing only a few years ago. So I don’t have a lot of experience. The coronavirus crisis is the first economic crisis I’m living through as an investor. I have continued my mutual fund SIPs, and have purchased a couple of stocks directly at reasonable valuations.
How do you know when to invest your spare cash opportunistically? You’d want to invest it at the bottom to maximize your returns. But here’s the truth – nobody can nail the market bottom in a bear market. In some crises, the market falls only 20-25%. In others, it could drop as much as 50-60%. You can’t time the market.
Ideally, I’d like to invest half the spare cash when the market falls 20% and the remaining half when it’s down 30% or more. If it falls even further, keep investing part of your monthly salary/profit. But don’t touch the emergency fund. And don’t ever borrow to invest in the market, no matter how attractive the investment opportunity.
“So, what would you have me do?” “Nothing. Sometimes nothing is the hardest thing to do.”
I assume you are not a millionaire. Neither am I. So here we are – two middle-class people discussing why middle-class people never get wealthy.