If you have received the pink slip in the latest round of company mass layoffs, do not panic because a few prudent decisions could help manage your finances well until your next job.
As mass layoffs at Twitter and Meta hit the global tech industry amid growing geopolitical tension and economic uncertainty, employees who were given the pink slip may have all the reasons to worry about their financial future. However, a few prudent decisions and strategies could help them tide over the crisis until they find their next job.
Major companies have started sacking employees left and right to cut costs. Meta CEO Mark Zuckerberg announced mass layoffs to begin on Wednesday. Last week alone, Elon Musk-led Twitter slashed nearly half of its workforce as part of its cost-cutting measures. The layoffs are seen as a larger trend in the technology industry.
Byju’s, the world’s largest education-technology company, recently announced the sacking of some 2,500 employees due to “job redundancy and duplication in roles.” Unacademy, another ed-tech major, laid off 10 per cent of its workforce or nearly 350 employees as funding slowed down significantly.
If you are the unlucky one who got the axe, you could follow certain financial steps to salvage your situation. “First step is to form a family budget by slashing all the avoidable expenses. This would give you a fair idea of the basic monthly expenses. If the savings bank balance is not much and if you do not have adequate emergency funds, you need to make decisions rationally as per the needs,” says Arijit Sen, a Sebi-registered investment advisor and co-founder of Merry Mind, a Kolkata-based financial planning firm.
“You must stop your discretionary expenses immediately. You must halt all the SIPs and ongoing recurring deposit (RD) installments. You must make sure you keep enough cash to pay your insurance premiums. Typically, You should use your funds in the following order till you find another employment: savings accounts, liquid mutual funds, bank fixed deposits (depending upon maturity date), debt mutual funds, equity mutual funds / direct equity (depending on the market),” says Renu Maheshwari, chief executive officer and principal advisor, Finzscholarz Wealth Manager, and a Sebi-registered investment advisor.
Look at your existing assets: Your other financial assets, such as mutual funds, Shares, fixed deposits (FDs), provident funds (PF), etc., can also come in handy during such a period in case you haven't separately planned for it. These assets form part of your expanded liquidity reserve as all these assets are immediately liquidatable. Even PF can be withdrawn upon job loss but may be considered a last resort as you may continue to use the same in your new job whenever you get one. Withdrawal is also allowed from your PPF account, subject to certain restrictions.
How to liquidate your assets: "You may use the following order to liquidate the assets. The first to consider would be FDs, if any. Market-related instruments like shares and mutual funds may be considered next. Do not worry about the market being up or down, as it will always be up or down with respect to a past benchmark anchor price. Your need is paramount; hence, you may withdraw even at a loss from these instruments. Once these get over, you may tap into your PF or PPF as well," explains Chenthil Iyer, founder and chief strategist, Horus Financial Consultants.
You may use your credit card, but carefully: The silver lining is that during such a severance from employment, there generally is a package offered by many employers such as three months' basic salary, leave encashment, etc., which amounts to a decent figure but it may take time to become available due to the administrative process involved. "Therefore, you may also use your credit card for most expenses during this period and pay it off once the full and final settlement is received," says Iyer.
However, make sure you use your credit card only if you can repay it on time. Interest rates on credit cards are very high, and they are not suitable for leveraging in an emergency.
According to experts, take advantage of decent market levels currently. "Redeem enough to create a liquid corpus of at least one year's expenses. Your older debt funds may not show a good external internal rate of return (XIRR). Hold them for a while until they reach normal levels, and use the funds from equity. Keep the cash in high-interest savings accounts of RBL Bank, Yes Bank, or IDFC First. Make sure that no money is lying idle," adds Maheswari.