TCS’s announcement to layoff 12,000 employees has got every one on edge. After all, TCS is one of India’s largest employers and 12,000 jobs amounts to 2% of its workforce. TCS may have been the first company to take such a drastic measure, but it certainly isn’t going to be the last. With the IT sector facing headwinds and the economy slowing down, senior members of the salaried class need to rethink their financial strategies.
If you’re worried about a job loss or your family’s financial security, then here are 5 smart ways to navigate these challenging times.
#1 Max Out Your Life Insurance Policy
Whether you’re a single- or double-income household, whatever you contribute matters to your family’s wellbeing. A household that is adequately insured is one that can tide through the loss of a loved one without the added financial stress. But how much insurance is enough?
This depends on something known as “the human life value”. This roughly equates to the potential income one earns over their careers. If you’re worried about a job loss or a pay cut, then there’s no better time to review and top up your insurance. So, if you’re out of a job, your human life value drops to zero. And if you switch to a lower paying job, then it reduces.
#2 Build Your Emergency Reserve
No matter what life throws at you, an emergency reserve prepares you to meet rainy days with calm and confidence. In normal circumstances, an emergency fund should contain 3-6 months’ worth of expenses (including EMIs and indulgences). When circumstances get more challenging, you should build a larger fund of close to 12 months’ worth of expenses. A larger emergency fund creates more optionality in terms of waiting for the right career opportunity or creating it yourself!
#3 Don’t Rely On Your Company For Health Insurance
Corporate health insurance policies are great because you can include aged parents, you don’t have to deal with waiting periods and exclusions, and it’s significantly cheaper. But the biggest risk is that it’s linked to your employment. An independent health insurance policy ensures continuity of cover. More importantly, as one ages opting for a new health insurance is an expensive ordeal in terms of time and money. The earlier you grab a health insurance policy and the longer you hold on to it, the more benefits you’re likely to reap.
#4 Prioritize Goals
Without a financial plan in place, money gets allocated to immediate rather than important goals. Putting pen to paper will help you prioritize which goals need to be addressed first. It will also help you eliminate goals that are irrelevant. Prioritizing helps with mapping financial assets and measuring how far you’ve progressed.
#5 Be Realistic
The IT industry has created a culture of job swapping for higher pay. If the sector is dealing with headwinds and the workforce is shrinking, a lot is going to change. Those who stay will work longer hours for less pay, bonuses and raises may be anaemic compared to how they were in the past, and the availability of new jobs will shrink.
This means wealth creation has to come from within the household rather than outside it. Essentially, families need to be more conscious of how they spend, where they invest, and how they grow their wealth.