Last Updated on September 27, 2023 at 5:08 pm
The media is blaring at full blast about the number of jobs (not just IT) that could be lost in 2017 and beyond and how it could be “bigger” than 2008. Whether there is merit in such speculation remains to be seen. What should be clear to anyone working in a non-government establishment is that there is always some chance of a sudden loss of income. In this post, I discuss simple steps to prepare for and handle layoffs.
Before we begin, a big “thank you” to all readers for your support in the launch of GameChanger and its companion Travel training kit. The book -kindle and hardcopy (pre-order) will list on Amazon this week. GameChanger (hardcopy_ is now available for ₹279 (249 +30 for shipping) and the Travel Training Kit is available for immediate download for ₹199. Users who have read the kit over the weekend will attest that it is still a bargain at 199. Or you can buy both for ₹349
Also the hardcover of You Can Be Rich Too With Goal-Based Investing Amazon Kindle edition Google Play Store edition is now available at for only ₹281 (30% off). The is also available for only ₹90.74 (you can use the free app to read it). The is also available for the same price (read on PC/Tab/mobile). Grab them before the offer ends!
Now to the business at hand. The growth of India’s service industry (not just IT) is a bit alarming!
Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email! 🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥
The IT industries share in the GDP is (only?) about 9-10% but industries are interconnected and there could be a domino effect if any one of them suffers. All services providers face potential layoffs at any time because of this, but since IT folk have a strong online presence we tend to associate layoffs with them more.
Step 0: What is a layoff?
The money management definition of a layoff is an unexpected loss of income that cannot be handled by the “usual” emergency fund which is about 3-6 months of expenses. And most people forget to replenish the emergency fund after the last withdrawal for say, a broken washing machine.
A layoff will a mini-corpus from which one can derive an income (constant if not inflation-protected) for 1/3/5 years depending on how long one has been preparing for the layoff, salary, employability etc. This is personal, but a minimum of 1Y for young earners and at least 3Y for those in 30-40 age group will help. Of course, this mini-corpus will have to be built over time and is NOT a separate entity as explained below.
Step 1: List all your investments in one place
You would be surprised as to how many people put this off for tomorrow. Unless we stare at the health (or lack thereof) of our finances in one page, we cannot prepare for any event. This activity could result in a pleasant surprise!
Step 2: The importance of being liquid!
Most people cannot see beyond returns when it comes to investing. Yes, returns matter. So does risk, as I keep harping. What matters the most is liquidity! What is the use of an investment if I cannot get my hands on it when needed (the most)?
I had earlier written about why one should stay away from Corporate NPS, if one Wishes to Retire ASAP! This applies to layoffs as well. NPS is the most ill-liquid product out there. you cannot exit it before 60 without annutizing 80% of the corpus. This plain sucks.
The good old EPF is one of the most liquid fixed income instrument out there. One can withdraw from after 2 months of a job loss. The government wanted this changed but bent under pressure from the unions.
So if your job is not secure, then avoid ill-liquid instruments like the plague. Ignore BS advice like “lock-in promotes discipline”. People who have faced emergencies would never say that.
Step 3: How much would I need to handle a layoff?
There is an app for calculating this, but you can simply assume that,
mini-corpus = current* annual expenses X 3
If you want to be able to manage without a salary for 3 years.
- to be reviewed each year.
This is not a goal for which one can invest. Retirement or financial freedom is the goal. A mini-corpus will have to be withdrawn from it (not necessarily in one shot) if you are laid off (and only if).
Of course, building a corpus that will last for even 1Y will take a while – anywhere between 3-6Y, depending on the amount invested. Therefore, the more uncertain your job, the sooner you should start investing! Everything sounds like common sense in hindsight!
So all one do is to start asap and maintain an asset allocation of 60-70% equity and rest in fixed income. The equity bit is usually liquid, but that is not much of a comfort if one gets laid off after a “2008”. Hence the need for liquid fixed income as mentioned above.
Step 4: What if I get laid off in the next few months?
Often they are too sudden to prepare. However, considering the implications of a job loss, it is okay to take the whispers seriously and make a temporary adjustment to the asset allocation – reduce equity exposure and increase liquid fixed income exposure – old enough PPF account; EPF; FD; debt funds bonds etc. You can reset the allocation once the storm has passed.
Once this is done, you may be able to work with a small measure of peace.
Step 5: Surviving the layoff
Depending on the severity of the situation, you can simply withdraw from the liquid fixed income (or maybe from an arbitrage fund) as and when you need it. This might seem simple now, but it is better to prepare for this when one can think straight.
What if I just started earning and get laid off?
If young people get terminated for no fault of their own, it is probably a wide-spread crisis! Well, we can only control, what we can.
The point is,
1: Someone with 5 years work experience should be able to manage a layoff of at least 12-18 months if they had managed money right.
2: No better time to take stock and fortify like now.
References
- Service Sector In India. https://www.ibef.org/industry/services.aspx
2. Sector-wise contribution of GDP of India. http://statisticstimes.com/economy/sectorwise-gdp-contribution-of-india.php
A reminder that GameChanger (hardcopy_ is now available for ₹279 (249 +30 for shipping) and the Travel Training Kit is available for immediate download for for ₹199. Users who have read the kit over the weekend will attest that it is still a bargain at 199. Or you can buy both for ₹349
Also the hardcover of You Can Be Rich Too With Goal-Based Investing Amazon Kindle edition Google Play Store edition is now available at for only ₹281 (30% off). The is also available for only ₹90.74 (you can use the free app to read it). The is also available for the same price (read on PC/Tab/mobile). Grab them before the offer ends!
🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 5000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! ⇐ More than 1,000 investors and advisors use this!
New Tool! => Track your mutual funds and stock investments with this Google Sheet!
- Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
- Have a question? Subscribe to our newsletter with the form below.
- Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.
Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!
Explore the site! Search among our 2000+ articles for information and insight!
About The Author
Dr. M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter, Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! ⇐ More than 3,000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter what the market condition is!! Watch the first lecture for free! One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course! Increase your income by getting people to pay for your skills! ⇐ More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts you and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!
Our new book for kids: “Chinchu gets a superpower!” is now available!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low-volatility stock screeners.
About freefincal & it's content policy. Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
- Twitter @freefincal
- Subscribe to our YouTube Videos
- Posts feed via Feedburner.
Our publications
You Can Be Rich Too with Goal-Based Investing
Published by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want
This book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.Your Ultimate Guide to Travel
This is an in-depth dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically, with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)