Ritesh Sabharwal CFP®

W.M.W #43: You are one step away from Poverty

Reading time: 5 minutes - April 11, 2026

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Hey Reader

Last week, Oracle fired 12,000 employees in India. 40% of their India workforce gone in one announcement. Twelve thousand families woke up to salary cuts, disrupted EMIs, and the sudden realization that the money stops but the expenses don't.

This isn't new. It's just louder. Google, Amazon, Meta, Microsoft, Swiggy, Byju's - the list of mass layoffs in the last 18 months reads like a who's who of companies people thought were "stable." f you are a salaried professional, you are just one step away from Poverty.

And every single time, the same pattern repeats:

• Week 1: Shock and severance
• Week 4: Optimism fades
• Week 8: Savings depleted
• Week 12: Borrowing from parents/friends or taking personal loans

Here's what nobody talks about: The difference between people who survive a layoff without financial damage and those who spiral into debt isn't skill or network.

It's whether they had 6-9 months of expenses sitting untouched in a bank account.

That's it. That's the entire difference. If your salary stopped today, how many months could you survive without touching investments or borrowing money?

If the answer is less than 6 months, that's the problem we're solving today.

What Actually Happens When You Lose Your Job (Without an Emergency Fund)

Let me show you what happened to Arjun, a 32-year-old software engineer from Bengaluru last year when he got laid off.

Arjun's salary: ₹1.4 lakh/month
​Monthly expenses: ₹1.1 lakh (₹32K home loan EMI, rent, groceries, school fees, fuel, 3 credit card bills)
​Savings: ₹40,000 in bank account
​Investments: ₹8 lakhs in mutual funds (long-term SIPs)

One Tuesday morning: Layoff email.

Month 1:

• Severance payout: ₹1.4 lakhs (1 month salary)
• Existing savings: ₹40,000
• Total liquid cash: ₹1.8 lakhs
• Expenses paid. Confident he'll land a job soon.

Month 2:

• Job search ongoing. A few interviews but no offers.
• Expenses: ₹1.1 lakhs
• Remaining: ₹70,000
• Starting to worry but still hopeful.

Month 3:

• Still no job. Interviews drying up (hiring freezes everywhere).
• Expenses: ₹1.1 lakhs
• Savings depleted. Borrowed ₹40,000 from savings account.
• Liquid cash: Zero

Month 4:

• Calls his parents and friends. Borrows ₹1 lakh.
• Considers breaking mutual funds but market is down 12%. Would book ₹96,000 loss.
• Skips home loan EMI. Credit score drops.

What destroyed Arjun financially wasn't the layoff. It was not having enough for managing expenses in liquid cash.

If he'd had 6-9 months of expense amount sitting in a savings account, he would've:

• Paid all EMIs on time (credit score intact)
• Not borrowed from parents
• Not considered breaking investments at a loss
• Searched for jobs without financial panic

Emergency fund isn't about being conservative. It's about not making forced financial decisions under pressure.

What is an Emergency Fund (And What It's NOT)

An emergency fund is:
✅ 6-12 months of expenses in liquid cash
​✅ Sitting in a savings account or liquid fund
✅ Untouched unless income stops or major emergency hits
✅ Your financial airbag during job loss, medical crisis, or urgent repairs

An emergency fund is NOT:
❌ Your investment corpus (mutual funds, stocks)
❌ Fixed deposits with lock-in periods
❌ Money you'll use for vacations or gadgets
❌ Optional if you have "stable" job

The Oracle layoff proves there's no such thing as a "stable" job anymore.

How Much Emergency Fund Do You Actually Need?

The formula is simple:
​Emergency Fund = Monthly Expenses × Number of Months
​But which expenses count?

Fixed Expenses (Can't be reduced):

• Rent/Home loan EMI
• Utilities (electricity, water, gas)
• Insurance premiums
• School fees
• Loan EMIs (car, personal)

Variable Expenses (Can be reduced in emergency):

• Groceries (can cut from ₹20K to ₹12K)
• Fuel (can reduce non-essential travel)
• Entertainment (can eliminate)
• Dining out (can eliminate)

Discretionary Expenses (Can be eliminated):

• Subscriptions (Netflix, gym, etc.)
• Shopping
• Vacations

How to Calculate Your Emergency Fund (Step-by-Step)

I've created a free Emergency Fund Calculator that does all the math for you. Here's how to use it:

#1: Customizable Inputs (tab ‘Emergency Fund Calculator):

• Total Monthly Expenses (everything you need): Enter in cell F8 of the tab.
• Fixed Monthly Expenses (can't reduce - EMIs, rent, insurance): Enter in cell F9.
• Variable Monthly Expenses (can reduce - groceries, fuel, utilities): Include those in cell F10
• Discretionary Expenses: Expenses you can eliminate in emergency (subscriptions, gym, dining out, shopping) - Enter in F13.
• Additional expenses: Enter any additional expenses you may incur during emergency such as medicine cost etc in cell F15
• Desired Coverage Duration: Specify the number of months you want the emergency fund to cover (e.g., 3, 6, or 12 months) in cell F19
• Existing fund: Input any existing fund you have with you in case emergency comes in cell F24 of the tab.
• # of months for creating Emergency fund: Enter the months required by you to create the emergency fund in cell F25. This input will auto calculate the monthly savings required to create emergency fund in cell F26 of the tab.

#2: Comprehensive Outputs (MAGIC Again!!! – no further inputs required)

• Breakdown by Expense Type: Provides a detailed split between fixed and variable expenses in the total fund.
• Total Emergency Fund Required: Auto-calculates the lump sum amount needed for the specified duration.
• Emergency Fund breakdown: Helps you with existing funds available along with balance fund required to build the fund.

Real Example Using the Calculator

Mr. Rahul's inputs:

Calculator outputs:

Rahul now knows: Save ₹15,556/month for the next 9 months, and he'll have a full 6-months emergency fund.

Where to Keep Your Emergency Fund

Option 1: Savings Account (Best for 3-6 months expenses)

• Interest: 3-4%
• Liquidity: Instant
• Risk: Zero
• Best for: Immediate access money

Option 2: Liquid Mutual Funds (For 6-12 months expenses)

• Returns: 6-7%
• Liquidity: 1 business day
• Risk: Very low
• Best for: Slightly better returns with near-instant access

Option 3: Split Approach (Recommended)

• 3 months in savings account (instant access)
• 3-6 months in liquid funds (better returns, 1-day access)

Don't use:
❌ Fixed deposits (lock-in, penalties)
❌ Equity mutual funds (volatile, can be down when you need it)
❌ Real estate (illiquid)

👉 Action Steps This Week

☐ Step 1: Download the Emergency Fund Calculator link​
​☐ Step 2: Fill in your actual expenses

• Fixed expenses (EMI, rent, insurance)
• Variable expenses (groceries, utilities)
• Discretionary expenses (can cut in emergency)

☐ Step 3: Get your target number Calculator will show exact emergency fund needed.
​☐ Step 4: Check your current liquid savings How many months can you survive today?
​☐ Step 5: Set up auto-transfer Start building the fund from next salary. Even ₹5,000/month compounds to ₹60,000/year.

The Bottom Line

12,000 Oracle employees lost jobs last week. Most won't financially recover for 12-18 months. Not because they're not skilled. Not because they won't find jobs eventually.

Because they didn't have enough months of expenses saved when the email arrived.
The emergency fund question isn't: "Can I afford to save ₹10,000/month?"
​The real question is: "Can I afford NOT to have ₹6 lakhs liquid when I lose my job?"
​Layoffs are no longer rare events. They're a normal part of working in today's time.

The only question is: When it happens to you, will you survive it without financial damage?

The difference between a layoff being a 3-month setback vs a 3-year financial crisis is one number: months of expenses you have liquid.

P.S. I write every day to help you make smarter money decisions. Connect with me on LinkedIn👇.

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