I am out of work: how to invest to get regular income for the next 1-2 years

Published: May 10, 2020 at 11:40 am

The lockdown has put many people out of business and in particular, some segments that dependent on footfall from other parts of the country or the world face huge uncertainty. Even if you are salaried and not sure if you would be in the coming months, a regular income stream has to be set up or at least planned for.

This article is a reader-request. If you have an article idea that covers a wide demographic do let me know. The pandemic is still some months away from clearing up and there could be additional waves.  Every day we wake up to not only increasing numbers but also lay-off news.

We will have to assume that you have some kind of net worth (to last 1-2 years) to speak of. Otherwise other than seek immediate alternative employment by some means nothing much can be done.

If your business has dried up and there is no possibility of a reasonable revival in the coming months or if your job is hanging by a thread, you can try and accomplish as many of the following steps as possible:

  1. Estimate for how long you need the income for and how much you need annually for essential expenses and loans (do not forget insurance payments)
  2. Suppose you need 3.5L for one year, then you need to have that much ready in an SB account of a reputed too big to fail bank (eg SBI, ICICI, HDFC)
  3. Yes, you can have a part of that in a liquid fund, but in the current climate with low demand for bonds and a weak upper, you will have to expect fluctuations in the NAV no matter how safe the portfolio is. See: Why Liquid funds and money market funds also fell in March 2020
  4. Assuming you would need the same 3.5L for the second year, you can invest a slightly lower amount in an FD maturing one year from now. This is known as an income ladder. Also see: Income Ladder Calculator
  5. This would secure income for two years. This is not the time to worry about tax and returns.
  6. Avoiding credit card use and non-essential purchases will also help. Yes lowering your lifestyle will help you sleep better.
  7. To source the 6-7 lakhs (for the above situation), you may have to stop future investment (okay, pause them otherwise the sales guys would get jittery), redeem some stocks, mutual funds, from PPF etc.
  8. This is not the time to think about your future responsibilities (like children’s education) or dreams. This is the time for security. When business picks up, investments can be resumed.
  9. If you have loans running then some tougher decisions will have to be made like for eg. selling your car, extending the home loan tenure to lower the EMI or … You can consult a SEBI registered fee-only advisors
  10. Talk to people, your family in particular. Do not lock up your troubles and live in distress.

Once you have done what you can:

Therefore do not worry about tomorrow, for tomorrow will worry about itself. Each day has enough trouble of its own.  Matthew 6:34

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