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Hanging by a threat

The noose around your finances is tightening. It may seem impossible to do so, but there are ways to loosen it. Find out how.

Narayan Krishnamurthy        Print Edition: November 27, 2008

Be greedy when others are fearful, says that sage of investing, Warren Buffett. But when you’re in shock over the losses on your investments, insecure about your job, worried about repaying your loan and unsure about meeting your monthly expenses, how can you be greedy? In times of turmoil, you seek safety and security. But if you are over-leveraged and saddled with debt, it seems impossible to do so.

According to the statistics released by the Reserve Bank of India, there has been a marked increase in credit card outstandings—from 49.5% in August 2007 to 86.3% in August 2008. It doesn’t help to know that this is a worldwide phenomenon. In the US, reports say that most people have more than seven credit cards each, and take new ones to pay off the older dues. The New York Times tracked one woman who had 27 credit cards and two mortgages on her home— and no job. Closer home, families are beginning to economise; in Ghaziabad, Sudhir Hundi no longer treats his family to a weekend movie and dinner, Pune-based Animesh Topno has put away plans for short, impromptu vacations.

We all know by now that prices have reached an unwarranted high, hot money may be rotating from the over-crowded developed economies to less crowded emerging markets, and traders may have had to increase liquidity in the face of losses in other markets. But how do you deal with the consequences of fluctuating interest rates, rising prices and global competition?

In the following pages we look at the risks in every facet of personal finance, and how people have coped with them to emerge winners. You may, perhaps, consider the original zero-correlation asset class—cash. But it won’t make you rich. Like Buffett said, keeping money around forever is like “saving sex for your old age”.

What if you risk and fail? Not to worry. The stigma attached to failing is fast disappearing. After all, failures mean new insights today. Even if it doesn’t pay off now, it’s bound to in the long run.

Without a raise, without a job

It’s not just the loss of an increment or a bonus that you have to worry about. If the situation worsens, you might even lose your job.

A. GAURAV
A. GAURAV, 28, NEW DELHI
Software engineer

"I knew the layoff was coming but the pace was too fast. Thankfully, I have a good network and managed to find another job within a month of being asked to leave."

In March 2008, all employees of the Madrid-based firm he worked for were told of the layoffs. He lost his job in May.

Every time there’s a financial, economic or political crisis, someone, somewhere loses a job. The recession in the US could have companies downing shutters in Gurgaon, a political change in China could see manufacturers in Coimbatore shut shop. This is just a long-winded way of saying that the world is not just a global village, it’s a global office. This time around, the job losses haven’t been as pronounced in India as they have been in the West, but there’s no saying when things might take a turn for the worse.

“My boss was candid enough to say that one can stay only as long as one is useful,” says Delhi-based A. Gaurav. The 28-year-old software engineer faced the brunt of a remote client in Europe restructuring his business, and was left with no project to work on.

“Product life-cycles are short. Constant innovation and product repositioning are the norm. It’s essential to keep moving just to survive,” says Dony Kuriakose, director, Edge Executive Search. The product Kuriakose is talking about is you—the employee.

So what can you do in times like these, when your skills and aptitude alone can’t keep you employed? “The current cycle is a great opportunity for market correction and for experienced people to shift to other sectors,” says Sampath Shetty, vicepresident, TeamLease Services. The name of the game is reinvention. Management gurus predict that 90% of white-collar jobs will soon disappear or will change beyond recognition. The 2001 dotcom bust and the resultant slowdown saw many retrenched middle managers changing job profiles or starting on their own. “The insurance and banking sector faced a talent crunch, which was resolved when many people moved from the conventional manufacturing and technology services sectors,” adds Kuriakose.

The problem is that many employees over-leveraged their skills in the talent bull run of the past few years. “Companies will have to do some spring-cleaning and belt-tightening,” says Kuriakose. His advice: “De-risk your career.” Be realistic about what you are worth professionally and tone down expectations. “Most individuals saw only the career upside and the unprecedented growth in salary packages without giving thought to the downside risk,” says E. Balaji, CEO of Ma Foi Management Consultants.

 WHAT’S THE RISK?

Recognise the risks related to your job and profession and then move to manage it.

Internal risks

Adaptability: Change is the only constant in today’s world. The faster you adapt to technology and environmental changes, the further you will go in your career.

Attitude: Organisations prefer optimists because they create a positive work environment that enhances productivity.

Domain expertise: Develop and upgrade skills. Gather knowledge to help you grow within and outside the organisation.

External risks

Economic slowdown: It could make your employer cut costs and downsize operations. This could also be the outcome of a merger or acquisition of your company.

Redundancy: With time, certain skills are phased out. You could face a situation where your skills are not needed any more.

Sector cycle: Industries operate in cycles. The construction and financial services sectors are currently in the downward phase.

The first step in de-risking is to consider objectively the value that you bring to your employer. With concepts of traditional career advancement changing, your best bet is to stick to and play up your strengths. “As companies underline the strength and resilience of ‘flat’ structures, climbing the ladder is no longer relevant,” says Balaji. This was also the trigger for many to take undue risks with their careers, hoping to manage more than they could handle and leapfrog into roles and situations they were unfamiliar with. It has become essential to look for opportunities beyond the department, company, even profession. This is possible only if you keep yourself employable. “You will have to constantly relearn and acquire skills that are market-marked,” advises Balaji.

Obviously, there’s no reason to panic yet. “The Indian IT sector is resilient enough to bear the impact of the turmoil. There will be some downside in the short and medium terms, which will be two-to-four quarters,” says Som Mittal, president of Nasscom. But anxious employees know that their finances might not be able to take the strain of a job loss, even if it is for a few months. “I had to pay the rent and also travel for prospective jobs. It ate up most of what I would have earned in a month,” says Gaurav.

All that the employees want to do now is to stay relevant in the new job environment. “Every mail makes me squirm as it could be something to do with a job cut,” says Sreekant Bhat, Bengaluru-based marketing head of a technology company. His discomfort is understandable; his company had to shut shop in Malaysia recently and is looking to cut costs elsewhere.

But this is not the case with all companies. Says Naresh Malhan, managing director, Manpower India: “There hasn’t been any dramatic move in salary cuts yet. Instead, companies are looking at innovative ways to cut other costs like travel and recreation without compromising on employee salaries or learning and development.” The way out now is to build career resilience, which will be the key to survival and growth. For the moment, all that the employees can do is to tighten their belts, build a good skill-set and prepare for a career slowdown.

Where it hurts Sectors that are likely to be hit the worst

India Inc: Assocham has estimated that 25% of the jobs may be lost, especially in sectors such as steel, cement, construction, real estate, IT, aviation and financial services.

Aviation: IATA has predicted that 1 lakh jobs will vanish globally. Indian players like Jet Airways, Kingfisher and GoAir have already started sacking.

Financial services: Manpower India has said that 9% of all employees in the BFSI sector are at risk; 25,000 employees may be asked to leave.

Retail: A recent survey has found that malls in 10 major cities witnessed a 22% decline in sales and 14% fall in footfalls in the Diwali season.

IT/ITES: Several foreign and Indian firms have laid off people; there may be more in the offing as the global crisis spreads to India.

— Inputs from R. Sree Ram

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