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

image of a man sitting down with a chair next to home as if to suggest he is out of work and thinking about how to generate an income for the next couple of years

Published: May 10, 2020 at 11:40 am

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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.

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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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Pattabiraman editor freefincalM. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. since Aug 2006. Connect with him via Twitter or Linkedin Pattabiraman has co-authored two print-books, You can be rich too with goal-based investing (CNBC TV18) and Gamechanger and seven other free e-books on various topics of money management. He is a patron and co-founder of “Fee-only India” an organisation to promote unbiased, commission-free investment advice.
He conducts free money management sessions for corporates and associations on the basis of money management. Previous engagements include World Bank, RBI, BHEL, Asian Paints, Cognizant, Madras Atomic Power Station, Honeywell, Tamil Nadu Investors Association. For speaking engagements write to pattu [at] freefincal [dot] com

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5 Comments

  1. How about investing ( in the secondary market ) in Non-Convertible Taxable Perpetual Subordinated Unsecured Fully paid up Basel III compliant Tier 1 Bonds – the coupon rates are above 8.5% and the bonds have been issued by PSU Banks.
    There is also public undertakings Secured Debt (e.g UP Power Corporation Ltd) at 9.75 % with A+ credit Rating ( Maturity 20-10-23)

  2. Pattu, if one is having rental income close to monthly expenses, what is suggested – to sell and earn a monthly income from interest etc or to keep the house and live on rental income?

    Secondly, do you have any views on Real estate (plots and not apartment/flat)?

  3. Nice article, These tips are really awesome, really like your post.
    Everything is so much clearer with your tips in the article. keep going.

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