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Can You Afford To Lose Your Job?

Subra from Subramoney.com talks about a tough situation with a person he knows:

He bought a house in Navi Mumbai for about Rs. 80 Lakhs, – of this about Rs. 55 lakhs was funded by a loan from the State Bank of India. Over the last 4 years he had paid a lot of interest, but the principal outstanding was still Rs. 52 lakhs.

He was also doing some SIPs which had seen an amount of Rs. 33 lakhs, but now in this market was worth Rs. 30 lakhs – not too bad, but the IRR was not too great. He does not have any debt investments except his LIC endowment policies – and all the policies are together worth Rs. 30 lakhs.

So far fine. He just lost his job with effect from December, 2011 or Jan 2012…..

He will have to find a new job, NOW and immediately.

What is at stake?

Household expenses (including children’s school fees) …….Rs. 100,000

EMI                                                         Rs. 52,000

His needs are as follows:

Rs. 1.5L x 12 = Rs. 18L – assuming he gets a job in 6 months, he will need Rs. 9 L.

The comments are interesting – asking him to sell his house, or to reduce his expenses and so on.

The main takeaway to me is: Can you afford to lose your job?

No one likes the answer and everyone thinks they’ll manage somehow. After all, one has a degree or experience or friends or close contacts like Dr. Vijay Mallya (“Viju, we call him”). But there are moments – too often to be an outlier – when a job loss comes and hurts everyone. I have some idea how it feels because being an entrepreneur can be equivalent to joblessness, in the sense that you don’t get a salary. I have fired myself – twice – and honestly I love me for it, no regrets.

I ask you to imagine, for a moment, what it would be like.

  • Your company has a huge problem – let’s just say some of its biggest customers went bust in some kind of market carnage. You’ve been asked to leave, with the general statement that “it’s not you, it’s the market”.
  • At first, you’re shocked. No one fires me. You wonder what you’ll say to other people. You justify it initially with the “I hated it anyway” excuse, which is probably quite true. But after a drink you admit it was on the cards. (hardly anyone ever gets fired that didn’t know it was coming)
  • Then you realize you have no idea what you spend, and how much you’ve saved. You gather together all of those statements and excel sheets and severance packages and take a good hard look.
  • Do you like what you see?

What have you done, to prepare for a job loss? How do you handle, specifically:

  • Stuff you absolutely can’t do without, like children’s school fees, food, rent/EMI for the 6 months it will take you to find a job.
  • Will you cut expenses? To the extent of dramatically changing lifestyle? (Like selling your car and taking public transport instead)
  • Given the emotional damage you’ve had, can you take a holiday? or are you leveraged to the point that even a month of no income will create a crisis?
  • How many months can you survive?

I’ll do a follow up post.

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