The startup landscape is renowned for its thrilling combination of risks and potential rewards. However, recent trends, particularly the funding slowdown of 2022, have ushered in significant layoffs within the Indian startup sector, affecting an overwhelming number of employees. These shifts underscore the critical need for financial preparedness, especially for CEOs, CXOs, COOs, and directors who have become accustomed to higher startup-era salaries.
Leaders who flourished in this fast-paced environment now find themselves facing the task of modifying their financial strategies in response to potentially decreased income levels. While this transition can be challenging, proactive planning and well-considered adjustments enable you to navigate these changes and preserve your financial security.
Here’s a roadmap for financially bracing yourself for a possible salary reduction:
Acknowledge the New Reality: The initial step is to fully recognise your altered financial circumstances. Don’t underestimate the impact of a decreased income, as underplaying it could lead to unwise financial choices. Lifestyle and luxuries that were once part of your life may need to be relooked at and revisited to asses their priority.
Reassess Your Budget: Conduct a thorough examination of your current income and expenses. Pinpoint areas where you can make reductions, which may involve eliminating non-essential spending or renegotiating recurring bills.
Prioritise Emergency Savings: A financial cushion provides crucial support during uncertain times. Aim to accumulate a reserve fund equivalent to 3-6 months of your current living expenses. This acts as a buffer should you encounter a period of unemployment or sudden costs.
Target Debt Reduction: Concentrate on aggressively paying off high-interest debts. This will unlock additional cash flow with each payment, enhancing your overall financial standing.
Investment Check-Up: Assess your current investment portfolio. Confirm whether your investments remain in sync with your risk appetite and modified income. Consider reallocating investments from high-risk to medium or low-risk assets to match your revised risk profile. If you are a regular investor, your investment portfolio could be complex, which is why you should consult a financial advisor to optimise your portfolio for your updated needs.
Welcome Frugality: Embracing a more frugal lifestyle holds no shame. Discover ways to economise on daily outlays, such as groceries, dining out, and entertainment.
Explore Additional Income Streams: Where possible, investigate avenues to generate supplemental revenue. This might encompass consulting work, freelance projects, or transforming a hobby into a side hustle.
Negotiate Strategically: If you encounter a layoff scenario, negotiate a severance package that offers fair financial compensation and continuation of health insurance coverage.
Revitalise Your Resume: You should anticipate the possibility of returning to the job market. Update your resume and initiate networking with those within your industry.
Remember, a reduced salary doesn’t have to hinder your financial progress permanently. By adopting these proactive measures and making informed adjustments, you can ride out this challenging period and confidently pursue your long-term financial objectives.
