Create a fund to meet three months' expenses in case of job loss

"So, who was that?" she asked as she entered my room with a view.

"The landlord," I replied.

"What did he want?"

"Basically, one of his relatives used to work in Woodpecker Airways."

"And?"

"As you know the airline is shutting down."

"Yes. Quite tragic, the way the whole thing has unfolded."

"And very sudden."

"Indeed."

"So, this relative of my landlord has lost his job and is looking for another one."

"Will he get one?" she asked.

"Looks very difficult. He is on the wrong side of the forties, and at the same time, people in his profile can easily be hired for half of what he makes."

"There is a problem."

"Yes. He was on the service side and not the technical side."

"Do you think that the government should rescue the airline on humanitarian grounds?"

"Not at all," I replied.

"And why is that?"

"Well, the thing is this. If you nationalise one private company which is on the verge of shutting down, then you set a precedent."

"So?"

"In the future, you give an opportunity to the employees of every private company which is shutting down to raise this precedent and demand that their company also be nationalised."

"Hmmm."

"Ideally, the government should govern and not look to run businesses. Having said that, in India, the government is already running way too many businesses," I replied.

"But what about the employees?" she asked.

"It's a sad situation, especially for those individuals in profiles where it is difficult to find fresh jobs."

"Hmmm."

"The point is that when you work in the private sector, you should be prepared for the eventuality of losing your job at any point of time, for no fault of yours."

"You are so heartless V."

"That's the truth."

"Hmmm. So how does one prepare for it?"

"There are a few basic things that one needs to do. At any point of time, have enough money in an emergency fund to be able to meet expenses of at least three months."

"How will that help?"

"Well, while income may come or go, expenses are always going to be there. In this scenario, an emergency fund always helps in meeting the expenses in difficult times."

"And?"

"It also helps in making good decisions in life. If you have some money lying in the bank, you can take some time to take on a new job and not jump at the first offer that comes your way, even when you know it's not good enough."

"That makes sense."

"Also, one thing I clearly see these days is that people are very comfortable taking on debt, even for something as frivolous as going on a holiday or buying a mobile phone, for that matter."

"The point being…"

"Don't take on unnecessary debt and leverage yourself. Debt should always be taken on for something that helps you create an asset. Like you take on a home loan to buy a home. In the days to come, even if you are not in a position to continue repaying the loan, you can at least sell the home and pay off the loan."

"You are even more heartless than I thought, V…"

I gave her a questioning look.

"Who sells a house that one is living in," she said. "It's such a matter of shame."

"With that attitude, you are still stuck in the 19th century. All I am saying is that don't take on unnecessary debt."

"Hmmm."

"Also, even when you have to sell off a house because you are no longer able to continue repaying the home loan, no one can take away the years that you have already spent there."

"Getting philosophical, are we?"

"More than anything, the chances are that after selling the house and paying off the home loan, you will still be left with some money. And that money will help you tide over the difficult times, if they continue for a while."

"Now that makes sense."

"Good," I replied. "So why don't you make me some coffee."

"In this heat?"

"Why not," I replied. "There is something called cold coffee as well."

The example is hypothetical.

Vivek Kaul is the author of the Easy Money trilogy.