Why job security influences personal financial plans

After his confirmation into his new position, Steven secured a 10-year mortgage with a leading home loan company.

He would put aside a portion of his monthly income for the repayment of the loan.

This was a good way of converting his rent into savings so that he could eventually buy a plot to build his own home.

Everything was running smoothly until the end of January this year when Steven’s employer issued a notice of an impending downsizing programme that is expected to reduce the number of employees by half.

The company wants to cut the overhead costs related to salary expenses.

There are many aspects of financial planning, including accumulating assets for retirement, estate planning, mortgage or meeting other short or long-term goals.

Although building an emergency reserve is one of the primary facets of financial planning, some workers believe a layoff or job loss is not a real possibility.

But Steven is sure the axe will fall on him and his biggest worry now is how he will sustain his mortgage repayment without regular employment. He has neither passive income nor a part time job . It is time to adjust all aspects of his financial strategy.

Steven’s case is not unique in this country where job insecurity has become a source of great distress to employees.

The impact of job loss is significant and will affect your lifestyle, personal well being and relationships, not to mention your financial planning (cash flow, mortgages investment risk, tax planning, insurance, legal issues and retirement planning).

For the last few weeks, there has been news of impending downsizing programmes in many local companies owing to increased competition and the bid to reduce operational expenses in a not-so-robust economy.

The lay-offs have dampened the hope of many employees who cannot bank on their jobs.

Employment is a critical element and pillar to sustainable personal financial planning especially in the long term.

It guarantees a sustainable inflow of income into the unforeseeable future without any worry of disruption or financial loss. This peace of mind is an ingredient in securing long term financial plans.

In the case of Steven, following the notice of layoffs by his employer, he has to figure out some alternative plans to keep up with mortgage repayments and adjust aspects of his financial plan.