IT layoffs scaring you? Here’s how to manage finances in the event of job loss

Tata Consultancy Services (TCS) recently announced a 2% reduction in its global workforce , totalling around 12,200 jobs, raising concerns among Indian IT employees. According to a layoff tracker called Layoffs.Fyi, 152,922 workers from 551 tech companies have been laid off in 2024, .

The layoffs are primarily attributed to AI-driven changes, weak demand for IT services and reduced business spending due to US tariff uncertainties, highlighting the need for robust financial planning and emergency funds.

This article discusses strategies for managing finances in the event of job loss.

Part 1: The intervening period

This is the phase when you are still reeling from losing your job. It's totally normal to feel down, especially if you have been working hard for years and suddenly got laid off. But, experts suggest that you shouldn’t let your sadness or grief throw you off track when it comes to your finances. Accept that the job you once cherished is done, and start thinking about how to manage your money moving forward.

Keep in mind that the savings and the investments that you made are your lifeline during this time without a paycheck. This is when your safety net becomes crucial for covering your basic expenses.

Firstly take a stock of how much money is needed for:

• Children’s education fees
• Car/bike loan
• Home loan
• Credit card emi
• Any personal loan EMI
• House rent (if applicable)
• Fuel expenses for car/bike
• Internet and mobile bill
• Groceries
• Household expenses
• Electricity
• Consumer durable goods EMI
• Others

Barring a few, most expenses can’t be skipped. For example: you can skip fuel expenses for your car by not using the car, but you can’t skip the car loan EMI.

Safety net:

In such times, it’s essential to hit a pause on your financial planning. You should focus on having enough to cover at least 6 to 12 months of household expenses and non-negotiable EMIs like home loan, car loan, etc. That’s why it is crucial to gather your resources -- like all your investments, severance package, FDs, and mutual funds -- , into one pool during this period.

Keep in mind that redemption from mutual funds can take 3 to 4 working days. It’s a good idea to have some cash in hand, some in your savings account and move a major chunk of your savings into fixed deposits (FDs). FDs can be liquidated faster than mutual funds.

It’s possible that some of you have not set up your finances and do not have emergency funds. In that case, consider liquidating old endowment insurance policies but keep term policies intact, suggests Suresh Sadagopan, Founder CEO, Ladder7. You can also redeem underperforming mutual funds. The idea is to create a financial safety net since your regular income has stopped.

Cut down expenses

Cutting down expenses does not mean stopping the expense altogether. It can also mean reducing the impact of the expenses. Suresh Sadagopan, founder of Ladder7 Financial Advisories, says: “Being laid off has nothing to do with your skill or quality of work. It's mostly because of business requirements. With an effective strategy, you can overcome this stage of life and come out at the top again. As one of the first steps to take, I would say cut down the discretionary expenses and take a stock of how much savings you have and what is your monthly fixed cost (school fees, EMIs, etc) outgo.”

Sadagopan says: “I would also suggest trying to try and shift to a lower rental place in the same city or shift to your hometown if possible. Sometimes, especially during school mid-terms, shifting to the hometown option is not possible, but after the term is over, it is something to think about. Also staying in the same city but shifting to a lower rent house, can mean that you search for jobs, give interviews, go to walk-ins, etc and save money due to shifting from a high rent accommodation to a lower rent one.”

Lovaii Navlakhi, Managing Director & CEO, International Money Matters says: “Financially, cutting expenses is the logical thing to do. Normally, there are indications of lay offs and in such cases, you are better prepared. However, if you have planned better you would be prepared with emergency funds to cover your expenses during the lay off period - so that you are not mentally down and out. That is important to allow you to be in a better state of mind. You could consciously decide that you will eat out once a fortnight instead of twice a week, as an example.”

Intervening period (Part 1)	Mid-term (Part 2)	Last resort
Damage control: Cut down discretionary expenses like travel, dining out, movies.	Education cost: Shift your children if possible to a school with lower fees	Unconventional loans: Taking overdraft against your insurance policies Credit card loan and converting it into EMI Loans against insurance policies and mutual funds
Safety net: Use the severance package, any liquid savings, FDs, mutual funds, to create a pool of common funds.	Gig economy: Take up gig-economy jobs at Zomato, Swiggy, Flipkart, Amazon, others.
Insurance: Keep the term insurance and personal medical health insurance policy	Start your own business: You can start selling your professional services directly to your network.
House rent: Move to hometown if possible or to a lower rent house	Freelancing work: Many websites like upwork, freelancer

Part 2: Mid-term

If you are in the mid-term category it means already four to six months have passed since you were laid off.

This situation can mean you have burnt through some portion of your savings and now you need to do damage control. Some of the drastic steps that you can take in this situation are to shift children to a school with lower fees, cut down on car/bike usage, and explore the gig economy (e-commerce, food aggregators, etc).

Sadagopan says: “Gig economy jobs are not a substitute for actual jobs. At best it can be like a band-aid. So if you have not got any job and it has been six months since you were laid off then exploring gig economy jobs can be a better option.”

Sadagopan says: “Another thing which I noticed during such turbulent times is people try to start their own business. It's a noble idea indeed, but starting a business and working for a company are two different things. When you are working in a company, all you need to worry about is how to deliver the work. But in business, you need to pay attention to how to get contracts/work, managing client relationships, employee salaries, business tax and legal compliances, etc. It's a mentally challenging exercise and then there is the question of profits. A good business needs initial seed funding and then recurring investments to sustain the business and in the process of doing this you might exhaust your savings. However, without substantial profits, your savings will not get sufficiently recharged.”

Just a reminder, your retirement savings like those in the National Pension Scheme (NPS), Public Provident Fund (PPF), and Employee Provident Fund (EPF) are important. If you find yourself unemployed for a month, you can take out 75% of your EPF corpus. Plus, if you’re out of work for over two months, you can access the remaining 25%.

That said, it is best not to touch these funds partially or fully for everyday expenses or lifestyle choices. They are meant for long-term security and should only beused in real emergencies like health-related expenses or to avoid loan defaults.

Part 3: Last resort

Despite all efforts if you have not managed a meaningful source of income you would need to keep pushing for it. However, you have keep an eye on your deteriorating financial position as well. At this stage, it means it's more than six months that you have been laid off. In this situation, you need to take unconventional measures to curb your financial outflow. Some drastic steps that you can take are:

• Taking overdraft against your insurance policies,
• Credit card loan and converting it into EMI
• Loans against insurance policies and mutual funds

However, you have to make sure that you borrow only that much amount which is absolutely unavoidable to manage your household at bare minimum cost. You have to also make sure at the same time you take up some part time or gig work to ensure that you pay back these loans.

Getting ready for future - Go for continuous upskilling

For IT professionals, upskilling is crucial. Those with outdated skills like C++ developers in a Phython-focused company, should consider learning new technologies to enhance job prospects. Networking is also vital in a close-knit industry.

Navlakhi, says: “It is important to understand why the lay-off happened. If there is an upskilling requirement to avoid future redundancy, it may be best to invest in learning. The crucial factor to consider on cost cutting is how quickly can one find a new job or earning opportunity. The balance between cutting costs and losing morale and confidence needs to be balanced.”