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Off late there has been layoffs / announcement of layoffs by the Mega Corporations like Facebook, Twitter, Amazon etc. It is not easy for an individual / family to deal with such a situation, since they have to deal with regular expenses , children school fees , mortgage EMIs and so on.

How to prepare, if anyone unfortunately comes across , for such a situation. Will share a 4 - step formula to cater such a turbulence.

1.Create an Emergency Fund : 
We recommend an individual/ family to create an Emergency fund of at least 12 months of expenses. For instance, if a family has monthly expense of Rs. 100,000/- then they should have an emergency fund of minimum 12 Lakhs at any point in time. This emergency fund will help family sail through uncertain times like layoffs . 

One can start Recurring deposit in bank/ SIP in Liquid Fund to create this amount, when an individual is currently on rolls. Once the target amount is achieved, you can stop the SIP/ RD and stay invested in Liquid Fund/ Fixed Deposits.

2.Reduce Discretionary Spending :
If you are the one who has been facing layoff, should reduce discretionary spending. Try to spend only on essential goods. Avoid unnecessary shopping/ purchases that can be postponed. Avoid going to movies, holidays during these times. Try to renegotiate your rentals if you are staying in rented apartment, or EMI holiday ( if you have home loans) or reduce EMI by increasing the tenure of Home Loan. Say No to Credit Card spending and keep the limits open just for emergencies.

3.Get Family Health Cover : 
You must be enjoying health coverage when you had been working with a corporate. However, once you move out of the company, your health cover ceases and health is one segment that cannot be left unguarded. Family floater plan becomes a priority once a person gets laid off. This will help him cater to medical expenses(if any) during the period of uncertainty. One can opt of 5 – 10 Lakhs family floater cover.

4.Work for Financial Freedom – 
This is mantra to success. During employment days, create a Financial roadmap for yourself to enable you attain Financial Freedom once you attain 40-45 years of age. That means, one should investing aggressively and reach a point wherein the investments start given annual cash flows which are equivalent to your current active income.

Let me explain with an example 
If your income is 12 Lakh per annum at age of 25 years , and is expected to reach 36 Lakhs per annum in next 20 years, one should start investing Rs. 50,000 in equity mutual funds over period of next 20 years to attain a corpus of approximately 7 crores, which will help him create a passive income of about 40 Lakhs per annum and he can enjoy his Financial Freedom. In the illustration above, the expected returns are in line to historical returns of 15% just for illustration purpose and actual returns may change as per market volatility/ investment option where the funds are invested. 

No doubt this is a difficult time, but this too shall pass. Create a monthly budget, keep a tight check on it and try to get on board at the earliest. Tough times don’t stay, tough people do.

Disclaimer – These views and recommendations are in personal capacity. One can seek financial advice from financial advisor as per his / her Financial Requirements. 

Sameer Kaila

www.dhancreators.com
#9998554836 , 9599956770