Jakarta, CNBC Indonesia – Loss of income due to layoffs is certainly a disaster that can mess up your personal finances. If all employees in the world have the potential to experience this, is frugal living the only way to anticipate this?

Living frugally without a goal can actually create psychological pressure that can lead to “revenge spending,” or excessive spending to compensate for desires that are always limited due to being thrifty, this was revealed directly by financial planner Preston D. Cherry on CNBC Make It.

Financial preventative action is certainly something that must be done as early as possible. If you don't understand what to do, here are the steps you can take.

Provide emergency fund savings

The ideal amount of emergency fund savings should refer to your regular monthly expenses, more precisely, expenses for mandatory and basic things.

Mandatory expenses can be in the form of children's school fees, debt repayments, or taxes. Meanwhile, the basic things are clothing, food and shelter.

If you are an employee without dependents, an emergency fund equivalent to three times your monthly expenses may be sufficient. However, if you have long-term debt or more than one dependent, it is highly recommended to have a minimum of six monthly expenses.

Layoff Insurance

Not only covering medical costs, providing compensation when diagnosed with a critical illness or death, there are insurance products that can provide compensation when you lose your job.

Generally, claims for benefits from this type of insurance can only be given when the company where the customer works is declared bankrupt or insolvent in accordance with court decisions and applicable law.

With this insurance protection and BPJSTK Old Age Security money, employees can certainly get additional emergency funds to survive or pay off debts.

And make no mistake, this insurance can also be useful for business owners who will be burdened with the obligation to pay severance pay to employees when a business risk arises.

[Gambas:Video CNBC]

(aak/aak)