Worried About Layoffs? Here's How To Build An Emergency Fund For Tough Times

Job insecurity is a major contributor to psychological and emotional stress, especially during abrupt events like sudden layoffs. The fear of losing a steady income can lead to anxiety, sleeplessness, and even physical health issues like headaches or elevated blood pressure. Building an emergency fund is a practical way to create a financial safety net for crises like layoffs, medical emergencies, or unexpected expenses. By saving consistently, you can navigate financial challenges with confidence.

Here's how you can start building an emergency fund

1. Set a Realistic Goal: Aim for 3-6 months' worth of living expenses to cover essentials like rent, utilities, groceries, and insurance. For example, if your monthly expenses are Rs 50,000, target Rs 1,50,000- Rs 3,00,000.

2. Start Small If Needed: Don't get discouraged if you can't save a lot at once. Start with a small, fixed amount each month, even Rs 1,000 can add up to a substantial fund over time. Automate transfers to a separate savings account to consistently set aside money without the temptation to spend it.

3. Assess Your Budget: Review your income and expenses to identify savings opportunities. Cut non-essential spending, like dining out or subscriptions, and redirect those funds to your emergency fund. For IT professionals facing layoffs, prioritise essential costs over discretionary tech purchases.

4. Open A Separate Account: Store your emergency fund in a high-yield savings account or liquid mutual fund for easy access and modest interest growth. Avoid risky investments like stocks, as the fund needs to be liquid and stable.

5. Automate Savings: Set up automatic transfers to your emergency fund each payday, even if it's Rs 100-500. Consistency builds the fund over time without relying on willpower. For example, saving Rs 10,000 monthly accumulates Rs 1,20,000 in a year.

6. Use Windfalls Wisely: Deposit bonuses, tax refunds, or side hustle earnings into your fund. For instance, a Rs 50,000 tax refund can jumpstart or boost your savings.

7. Protect The Fund: Only use the emergency fund for true crises like job loss, medical bills, or urgent repairs, not for planned expenses like vacations. If your expenses rise, adjust your savings target accordingly. If you need to use part of the fund, prioritise replenishing it as soon as possible.

8. Stay Disciplined: Treat your emergency fund as a priority, especially in volatile industries like IT, where layoffs can strike suddenly. Regular contributions, even during stable times, ensure readiness.