Losing a job can change your financial plans very quickly. One day, you are planning around a regular salary. The next, you are thinking about rent, bills, debt repayments and how long your savings can carry you.
It can be tempting to panic and start making major financial decisions immediately. A better approach is to slow down, understand what you have, protect your essentials and create a plan for your next source of income.
Here are four steps to take if your salary suddenly stops.
1. Don’t Panic, Take Stock of Your Money
Your first step should be understanding your financial position. Before making major withdrawals, selling investments or taking another loan, find out exactly what you have available. Check your savings, cash, investments and any money you are still expecting from your former employer. Depending on your employment arrangement, this could include unpaid salary, outstanding benefits or other payments.
Next, calculate your essential monthly expenses. Include rent, food, electricity, transport, healthcare, debt repayments and other bills that you cannot easily postpone. This gives you your financial runway. If you have ₦1.2 million available and your essential expenses are ₦200,000 a month, for example, you have roughly six months of coverage before considering any additional income.
Knowing this number can replace some of the uncertainty with a clearer plan.
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2. Build a Temporary Budget
Your normal budget was designed around having a regular income. After losing your job, it needs a temporary adjustment.
Start by separating your expenses into essentials and things you can pause. Rent, food, utilities, transport and healthcare should come before entertainment, unnecessary shopping, subscriptions and other discretionary spending.
This doesn’t mean you have to eliminate every enjoyable part of your life. The goal is to make your available money last while you work towards your next income.
If you have debts, don’t simply ignore them because your income has changed. Contact your lenders early if you expect difficulty meeting repayments and ask what options may be available.
A temporary budget also helps you identify spending habits that may have gone unnoticed while you were receiving a regular salary. A few smaller expenses can add up significantly when there is no new income coming in.
3. Protect Your Financial Foundation
Job loss can make long-term savings look like an easy solution. Before you cash out investments or withdraw money meant for retirement, consider what you may be giving up in the process.
If you have an emergency fund, this is the kind of situation it was designed for. Use it carefully and prioritise essential expenses rather than trying to maintain your previous lifestyle.
You should also review important financial protections. If you have health insurance or other forms of cover, understand what happens when your employment ends before cancelling anything. Losing access to healthcare protection at the same time as your income could create another financial problem.
At the same time, look for legitimate ways to bring in money. Freelancing, consulting, contract work, tutoring, selling unused items or taking temporary work could help extend your financial runway while you search for your next full-time opportunity.
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4. Start Planning Your Next Source of Income
Managing your expenses can buy you time, but restoring your income remains the bigger goal.
Update your CV, refresh your LinkedIn profile and start contacting people within your professional network. Don’t limit yourself to permanent roles. Contract work, freelance projects and short-term opportunities can provide useful income while you continue looking.
This can also be a good opportunity to reassess your career direction. Perhaps there is a skill you have been meaning to develop, a service you could offer or a business idea worth testing alongside your job search.
Most importantly, don’t allow the loss of a job to become a judgement on your value. Employment can change because of restructuring, business decisions or circumstances outside your control. Your skills and experience remain yours.
Once you have a new source of income, you can focus on rebuilding your emergency fund, restoring investments and strengthening the financial cushion that can protect you from another unexpected change.
If your salary stopped tomorrow, how many months could you comfortably manage with the money you currently have? Tell us in the comments, and follow RefinedNG for more practical financial literacy tips.