Retrenchment & Financial Matters

I was retrenched from my job around 3 months ago. It was not an easy experience for me as I went from a daily work routine to a sudden lifestyle of having nothing to do at all. It took a toll on me mentally I guess as our work and occupation forms part of our identity and losing our jobs is akin to having our identity being taken away partially.

Thankfully, I found a new job rather quickly in less than 3 months time and I had a few job offers, of which I settled on a job with a pay increase. I do count myself as really fortunate given the poor economic outlook and job market presently.

Given that losing our job means that the our monthly salary will cease and I believe that the main source of income for the majority of us comes from our salary, this will create financial stress during this time of unemployment. Retrenchment is without doubt, a harrowing experience and I have gained a few financial insights with regards to this experience.

1. Have some savings in the event of adverse risks such as retrenchment

6 months of savings is commonly advocated by financial advisers to cover for the risk of retrenchment. I had some sufficient savings which would be enough to last me for a year of expense. This is really important as knowing that I had sufficient savings, I was not hard-pressed to take on a job quickly even if the job does not pay well or does not interest me. Retrenchment is not uncommon these days given that economic cycles are getting shorter and it is important that you have savings to back you up.

2. Lower your housing consumption

A couple of years ago, I made the decision to opt for a 4 room HDB BTO flat in a non-mature estate, knowing that in the event which either my other half or I would like to stop working for a while, we can do so knowing that our monthly housing loan payment can be covered by just one of our individual CPF account. Fast forward to today, this seems like a prudent move given that at the point of my retrenchment, we had enough in our CPF accounts to cover for the monthly housing loan payment even if I were to stop working for a few years. That being said, I would like to stay in a mature estate due to the proximity to town and no lack of established amenities but I guess my pragmatism got the better of me.

3. Own your career development

For the majority of us, our main source of income usually comes from our employment before we are financially free. As such, it is important to grow and to protect this source of income by taking charge of our career development. During this period of unemployment, I engaged the services of a career coach and what he advised really struck me. He told me that retrenchment is not uncommon these days and it is important to develop yourself and have transferable and multi-faceted skill-sets that can transcend industries so that it will be easier to look for a new job if the industry that you are in is not doing well. Before I was retrenched, I was already taking courses and certifications to expand my skill-sets to switch industries and this really helped me in my job search during my period of retrenchment as I was able to secure job offers in various different industries.

4. Have a war-chest ready that is separate from your savings

I believe I have been preaching for a long time on my blog that it is important to set aside a sum of funds to take advantage of any market opportunities during any economic downturn. Unfortunately, it is also during a economic downturn which we face the highest risk of losing our jobs. If we are not prepared in setting a sum of money to cover our expenses if we are retrenched and in the process of looking for jobs and set aside another sum of money to purchase assets such as stocks, it will be difficult for us to grow our net worth and take another step towards financial freedom. I guess this is how the rich gets richer since their income does not come from their employment and they are able to capitalize on market opportunities during economic downturns.

5. Materialism does not make our lives more fulfilling

This retrenchment really drives home the message in my mind that we do not need a lot in life to be contented and fulfilled. During the period of retrenchment, there was a natural instinct for me to cut back on our expenses and I took this time to re-look at my spending. In my opinion, having more material goods such as clothing, shoes, watches etc. will not make us our lives any more happier. These days, I make a conscious effort to reduce waste in my life such as using water which was used to wash rice to water the plants, repair my pants by sewing any tears, switching off lights when not in use and electrical appliances on standby modes, cook more often and try new recipes to make use of leftovers instead of throwing it away, make a conscious effort to see if I can avoid buying new items by re-using or modifying existing items which I have owned.

Overall, getting retrenched was not an easy experience but I have gained some interesting and valuable insights. In addition, this has also strengthened my resolve to be financially free as soon as possible as I may not be so fortunate to find a job so soon if I am retrenched again in the next economic downturn a couple of years down the road. Coincidentally, I received the biggest amount of dividends to date from my stocks portfolio on the month which I was retrenched and this has certainly add to my resolve.

 

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