Worried About Losing Your Job? A Guide to Handle Potential Sudden Loss of Income

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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!

Source: http://statisticstimes.com/economy/sectorwise-gdp-contribution-of-india.php


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.


  1. 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!


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About the Author M Pattabiraman author of freefincal.comM. Pattabiraman(PhD) is the author and owner of freefincal.com.  He is an associate professor at the Indian Institute of Technology, Madras since Aug 2006. Pattu” as he is popularly known, 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. Pattu publishes unbiased, promotion-free research, analysis and holistic money management advice. Freefincal serves more than one million readers a year (2.5 million page views) with numbers based analysis on topical issues and has more than a 100 free calculators on different aspects of insurance and investment analysis. He conducts free money management sessions for corporates  and associations(see details below). Previous engagements include World Bank, RBI, BHEL, Asian Paints, TamilNadu Investors Association etc. Contact information: freefincal {at} Gmail {dot} com (sponsored posts or paid collaborations will not be entertained)
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