POSTED BY October 9, 2017 COMMENTS (35)ON
Job loss is a scary situation because it’s a big disruption in your life. If you lose your job, you need to suddenly look for another job quickly because you have to meet your household expenses and also deal with the emotional crisis.
In case of a layoff, you also lose self-confidence and start doubting yourself and keep wondering what the future is going to be now. Look at these news headlines which talk about so many job losses in India. While all the sectors have layoffs, these headlines are more from the IT sector.
Have you ever thought about this situation? Have you ever visualized about losing the job?
We all are so confident subconsciously that something like a job loss is never going to happen with us. We hear that it has happened in someone else life, but we consider ourselves so lucky for no reason.
Our lives are smooth and our planning for the future is perfect, but it’s critical to check if you can take the bad news of job loss? Is your financial life strong enough to handle that situation?
Have you ever thought about this?
Have you ever thought about how you will be paying your EMI’s, your kid’s school fees, rent, various other household expenses and how you will deal with stress and the insecurity which will come with the job loss. If we pick the software industry, there is enough bad news coming in from the last many years.
The industry is going through tough times (and even good times) and it’s not very uncommon to hear that thousands of employees got a pink slip and lost their jobs!
If we talk about you, are you skilled enough to find a new job in the same industry with the same pay package? Can you afford a lower salary? Do you have enough savings to deal with the stress of living without a paycheck for the next 6 months?
I found some real-life experience of people who are sharing about their job loss and how they felt about it. Please read them to understand how it feels and what it means.
Below is an experience of Mr. Ganesh who shares how he lost the job and had to face issues in his life.
Here is another experience of a quora user who worked for Symantec and lost a job when his wife was 5 months pregnant.
How to prepare for bad times?
We don’t wear a helmet while driving because we want the accident to happen. We wear it so to make sure we are protected if something goes bad accidentally.
In the same way, we should design our lives in such a way that even if we lose our jobs, the impact is limited and the emotional and financial loss is in control.
I know losing a job is not a great thing. Most of the wake up when they actually lose the job and start thing on what to do.
Don’t be that guy!
While you can’t stop someone from fire us, you always have control over what you can do to face that situation. So let’s talk about a few things you can and should do today to be ready for that scenario.
When you lose the job, the immediate question which comes to your mind is – “How will I pay my bills?”
You have EMI’s, household expenses and many more things to deal with. You already know how messy it can get. I don’t want to get into details of it, but you need to pay all the bills. At best you will be able to stop a few things for a while, but how long?
You should have enough liquid money with you which can last for a few months. It’s like the emergency fuel (6-month expenses) you need in your car to reach the petrol station (new job).
One more reason why you need to have enough emergency funds with you is that it gives you more power to choose your next job.
If you do not have money at your end to last another month, you are too scared. It’s a panic situation which forces you to choose any job which comes next. It’s like being desperate for marriage and then saying YES to the first person you meet. Not a good thing for the long term.
Action for you: Just multiply your expenses by 6 and keep that amount invested somewhere which can be available at short notice (like few days). The focus has to be more on availability and not returns. You can choose a debt mutual fund or a simple fixed deposit for this.
A good habit for any investor is to make sure that their income is 1.5 times of their expenses. You should not be living a life where every penny you earn is getting spent.
I know it’s easier said than done for many people, but at least start taking action towards this.
There are two benefits here.
Benefit #1 – You will have good surplus each month which you can invest in for the future. It keeps you worry-free and you also can save good amount.
Benefit #2 – When you lose your job someday, you at least have an option to take up a job that is paying you less. Imagine you are earning Rs 1 lac per month. In case your expenses are neck to neck, you will not be able to accept a job that is offering you Rs 80,000 a month. Can you?
I strongly suggest that your total expenses (including EMI and everything) should not cross 60% of your income. It’s a good habit to practice in your financial life.
Action for you: Find out the ratio between your income and expenses. How much are you saving each month right now? If it’s less than 40%, focus your energy on earning more income. If not immediately, give yourself 2-3 yrs of time when you will increase your income to the next level.
Don’t be mediocre in what you do. Don’t be average in what you do.
Are you a java developer? Then be the one who knows everything inside out and make sure you are among the top 5% in the entire world
Are you a marketing guy? Then make sure you are the one who can really transform the marketing of a company if you take that task in your hand.
Are you a chef? Then make sure you are worth inviting to master chef show!
Whatever you are doing right now in your life, just make sure you are ONE OF THE BEST.
I am not saying that you should do something extra ordinary in life, but whatever you are doing, strive to be one of the best in that field.
If you focus on this, then you probably will never lose your job. And even if you do, you will quickly get another, And if you don’t get another job quickly, you will at least be calmer and composed than others who know that it’s just a matter of time. Your panic level will be low.
Action for you: Make a list of things you need to do to go to the next level in your profession. List down which are the training you need to attend, list down which all certifications you need to complete. List down if you need to change your job to learn new skills? List down if you want to ask for help from someone more awesome than you. List down all the points and complete that in the next 12 months.
There is this concept of human capital and money capital.
Human capital is our ability to work and earn money, it’s about the potential and how much you will bring in the future.
Money capital is your portfolio which gets build over time, you keep earning money and save from it and start increasing your money capital.
When we start our career, we are high on human capital and zero on money capital. When we retire, we have money capital and very low human capital (maximum cases).
Start building a good portfolio
Focus on investing and saving money from a long term perspective. It’s better to lose a job with 50 lacs lying in your mutual funds and deposits in the bank. It’s a much better panic situation compared to just having some money in your bank account.
I know it’s very tough to have any portfolio at the start of the career but do whatever best you can do. Focus on creating your first 1 lac, then first 10 lacs, then first 50 lacs.
But at least take actions to reach there.
If you have good amount in your portfolio it feels safe. You can fall back on something which can last you for many years in the worst case. Imagine not having much in your portfolio and losing a job. Even Rs 10,000 invested per month can give you 25 lacs in 10 yrs if done in the proper way.
So ask yourself, if you have enough money capital as per your situation? Have you built and saved your money capital or not?
In the case of job loss, most of the people who are in extreme panic are those who have no sufficient money capital and human capital. Even if you save 10% of your money income on a consistent basis over your working life, it’s going to be a very huge amount. But most of the people even fail there.
Action for you: First slow down. Then see how much is your monthly surplus each month? Are you investing that money on a regular basis? If not, it’s time for you to start your SIP (our team will help you in building wealth in a systematic manner).
Let’s quickly look at a few points which lead to a job loss. Many people just do wrong things at work and expect to never get fired. If the points below are true for you, its time you relook at your approach and take corrective steps.
I hope I was able to reignite your thoughts on these points. Do let me know how many marks out of 100 will you give to yourself on preparedness for job loss?
If you are 100% prepared and ready to cope up with it, you score 100/100, else 0/100 at the extreme end. I would like to hear about this from you and what you are going to do about it.
Jagoinvestor is an initiative towards creating happy investors who take prudent and right financial decisions in their life.
Here is the list of some of our best content.