The misery of Stock Exchanges is spilling out to the entire financial sector and after four successive years of huge bonuses and salary increases, some are suddenly finding themselves out in the street. Many equity analysts in broking houses, BPOs and KPOs have got the pink slip. Reportedly banks too, are trimming the fat to reduce operating expenses. Many employees are seeing a sharp drop in the variable components of their salary forcing them to juggle financial commitment like experienced circus artists.
It was not entirely unexpected. The wearing signs have been there for a long time. The problem is that people have borrowed heavy or lost in the market, and are finding if difficult to cope with loss of their job.
Employees knew it was coming, but they thought it would only affect their increments and bonuses. Also they never thought they’d get rid of employees to save money. The warning signs were there since the beginning of the year. But you never believe the worst can happen to you; it always happens to other people. We were the most trained in the financial services KPO and the most expensive resources and yet we were the first to be axed when cost cutting became necessary.
Unfortunately, while they are still looking for another job the market remains in the doldrums and most companies have frozen their hiring programs. Placement agencies are asking them to be patient. Employees have seen most of their colleagues go through three distinct phases. First, confidence that a job will soon come by. After incessant phone calls to consultants and friends comes the second phase one of a desperation when most of them spend around four hours a day calling consultants who in the present market, do not even call back. Then people move into the ennui phase. They leave it to luck. Most keep calling and attending interview. But there are so many applicants for each job and so many companies putting most positions on freeze now, that it is very difficult to find a new opening and apply.
Worse, since layoffs are not common in India, many of these ousted workers face great emotional trauma, too. Some – especially young professionals who live away from home – don’t even inform their families about their job loss. Those who have their own families are dipping into savings and having trouble making ends meet. In one case although wife has a steady income the family still dips into their savings because of a huge housing loan.
Sure they can’t avoid the situation as their fate is linked to not just the domestic stock market but international ones, too. What they must do is to be more careful and plan when times are good. People are advised to have at least three to six months expenses in a savings bank account or in a liquid fund. One should not use more than 25-30 of one’s income to repay loans. In the last two years there were such massive pay hikes that many people lost all sense of proportions, they were buying bigger homes and cars and borrowing like never before. They never thought of basic stuff like savings for a rainy day. Always plan for what might happen if the market enters a bear phase. That will ensure the necessary dose of reality in planning our lives.
It is not just liabilities that have landed people in trouble. Some have also opted for risky investments without giving due consideration to their risk taking ability. If you earn Rs 1 lakh and you save only Rs 10,000 you can take a risk worth only Rs 10,000. This is your margin of safety. If you forget this and leverage your money you may be in for a lot of trouble. ‘A’ moved money from fixed deposits to mutual fund schemes when the market was on song. Now he needs the money but can’t pull it out, as most of his mutual funds have yielded negative returns in the past year. His mistake was that he violated the principle of asset allocations in response to market mood.