I am 36 and was laid off recently. I have Rs 40.5 lakh as savings. How do I manage my daily expenses?

I am 36 years old, have a family, and was recently laid off by my employer. I was earning Rs 1.5 lakh before the layoff. I have savings of Rs 40.5 lakh. Rs 30 lakh is in MF and shares, Rs 10 lakh in PPF and Rs 50,000 in FD. How do I plan for my daily expenses? What are the do’s and don'ts? 

Name withheld on request

Reply by Sushil Jain, CEO, PersonalCFO.in

As a financial life planner, we can understand your current situation. But don’t panic. Instead of panic you need to plan how to manage your current situation. As we always advice, one should divide income in three categories, 25% saving and investment, 25% in lifestyle expenses and 50% in household expenses. You should first stop lifestyle expenses, if it is not sufficient than stop your regular investments like SIP. If you are not able to manage your expenses after that then follow these three steps.

1) Evaluate your current spending

2) Estimate your new monthly cash flow

3) Generate active as well as passive income

1) Evaluate your current spending

Pen down all your expenses, divide your expenses in following category

• Food, Utilities, Shelter
• Expenses that can be postpone
• Expenses that can be given up for now

Certain things you cannot live without such as housing, food and utility, but other expenses can be postponed or given up. Outflow like debt repayment can be restructure or deferred (such as for home or vehicle loans, one can request the bank to reduce the EMI amount by increasing the loan tenure) and expenses like eating out can be gotten rid of, and so can subscriptions that you hardly use and other unnecessary, miscellaneous expenses.

2) Estimate your new monthly cash flow

You need to calculate your monthly financial commitments and liabilities (make sure that your priorities your fixed expenses such as insurance premiums, loan EMIs, etc.). Check and budget your savings in such a way as to have funds to last you at least for six months. If you don’t have enough savings, then try to plan out how long these funds could cover your lost income. This can help you determine how much additional financial support you may need per month to stay afloat.

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3) Generate active as well as passive income

Once you work out the revised-out flow and passive income (if any) you need to work on investment reallocate to create additional passive income and generating active income to fill the gap.

Passive Income

You can generate passive income from your current investment through Systematic Withdrawal Plan. You can reallocate your fund as below

Rs50,000 in FD for immediate liquidity
Rs10 lakh in debt hybrid fund for regular cash flow to fill the gap through SWP
Rs 10 lakh in equity hybrid fund for medium term portfolio growth
Rs 10 lakh in equity fund for long term growth
Rs 10 lakh in PPF for debt asset allocation and retirement
 

Generate Active Income

Keep yourself open to the options, do not let your pride get in the way of a pay check right now. You are not above an honest job that will help you take care of your family-no matter what your last pay grade was. It is more important to be in the industry than out of industry by not opting job available in the market.

Consider more substantial alternatives

If you’re strapped for cash now, and the options listed above aren’t enough to get you through, you may need to take more drastic action to keep up with your living expenses. Consider reaching out to friends and family members to ask for a personal loan, as they may be willing to offer you more agreeable terms than a traditional lending institution.

(Views expressed by the investment expert are his/her own. E-mail us your investment queries at askmoneytoday@intoday.com. We will get your queries answered by our panel of experts.)