Cut financial flab to navigate your way through a turbulent job market

Curtail discretionary expenses and avoid fresh loans amid the current uncertainty

Google, Amazon, Meta, Twitter, IBM, Intel, Microsoft and scores of other marquee tech names have announced layoffs in the thousands in the United States. Employees of their Indian arms haven't been spared the mayhem either. The funding winter in the start-up (including edtech) space, too, has led to massive job losses. A recent study by marketing and analytics firm Kantar has found that one of every four Indians is worried about being laid off.

While you have no influence over your company’s Human Resource Department’s decisions, a few steps to bolster your personal finances can help you navigate the current turbulence in the job market better.

Create an emergency fund

The emergency fund should be large enough to take care of your household expenses, equated monthly instalments (EMIs) and other fixed expenses such as insurance premiums and children’s tuition fees. “The emergency fund should cover at least six months of living expenses and other liabilities,” says Santosh Joseph, chief executive officer (CEO) and founder, Germinate Investor Services. Single-income families may even consider an emergency corpus that will keep them afloat for 12 months.

The emergency fund should be parked in bank fixed deposits or liquid funds where it can be accessed easily. Don’t keep this corpus in stocks or equity funds where its value could erode due to market turbulence.

Begin belt-tightening

If things don’t look hunky-dory, start trimming your expenses and increase your savings. Begin by taking a hard look at your current expenses. “Redraw the monthly budget and create three pockets of expenses: absolutely necessary, necessary but can be deferred, and expenses that must be deferred,” says Arvind A Rao, founder, Arvind Rao and Associates.

Anil Rego, founder and CEO, Right Horizons, suggests drawing up an ‘urgent-important’ matrix to help you separate the urgent outflows from the non-urgent ones.

Credit card expenditure, in particular, must be reined in. “Credit cards can be a big source of frustration and financial drag if they are not managed properly,” says Rego.

Be adequately insured

An employee who is fired loses his health insurance cover immediately. “Get an independent medical cover for your family and yourself in addition to the cover provided by the company,” suggests Rao.

Also review the life insurance and other policies you have bought. You may learn that you forgot to pay the premium on the due date for one of them. In that case, initiate the process of reinstating the policy by paying the premium and the penalties.

Besides a family floater health cover, Rego also suggests having a cover for critical illnesses, accidental death and disability, and a term life insurance cover equivalent to at least 10-15 times your annual income.

Amid the current uncertainty, it is especially important to not allow yourself to be persuaded into purchasing insurance-cum-investment plans (traditional life or unit-linked insurance plans) whose premiums tend to be high.

Rework your loans

Repaying loans becomes extremely challenging in case of sudden loss of job. New loans must be avoided. “Avoid excessive loans, leverage and liabilities. These habits tend to cripple a person in an uncertain job environment,” says Joseph.

In good times, many individuals opt for a short loan repayment tenor to save on interest cost. However, if you are staring at a job loss, you can approach your banker and ask for a longer tenor. If the current lender is not keen to extend the tenor, consider refinancing your loan with another lender for a longer tenor. This will bring down the EMI and create breathing space.

Consider re-skilling

Skilled manpower always remains in demand and can command a better salary. Instead of looking to add new skills after a job loss, start a course today. Also work harder on expanding your network. Many individuals land the right jobs not because they are more skilled but because they are known to people who are aware of vacancies.

Once you’ve been handed the pink slip

• Pause SIPs and other investments temporarily if required  
• If you have a few days’ leeway, contact the insurer offering the health insurance cover at the company and try to convert the group cover into a personal cover
• The severance money you receive may be used to retire high-cost debt like credit card dues
• But don’t burn scarce cash on repaying low-cost debt like a home loan
• If you are in dire need, go for a collateralised loan like a gold loan or a loan against property instead of a personal loan
• You may also use a top-up home loan to retire high-cost debt