Just yesterday, I came across an old tweet by the famous Nassim Taleb:
While I kind of agree with what he says, it is also true that there are many who are afraid of AI and its potential to lead to unfavourable outcomes for them (like temporary or permanent job loss, etc.).
Every few weeks, there is a fresh prediction about AI wiping out white-collar jobs in the near future. To be fair, there are definitely things happening that are causing people to lose their jobs due to AI-led workforce rationalisation. That said, I am no expert in this space. And most people don’t know how fast companies will adopt AI, which roles will go first, or whether regulators will step in.
As an investment advisor and a goal-based financial planner, I don’t need to know all that as well. All I need to know is whether a client’s finances will survive a long gap without a salary and how prepared they are if such a thing were to happen.
Here are a few things which should be considered if you too feel threatened by the AI wave:
Build Up A Higher-Than-Usual Emergency Fund (but not an enormous one)
The general thumb rule for an emergency fund is about 6 months of expenses. Many now say 12 to 24 months. I would be careful with that view. Say for monthly expenses of Rs 1 lakh, and two years of buffer, allowing for inflation, means roughly Rs 25 lakh sitting in FDs or liquid funds. Post-tax, those earn about 5% to 5.5% for someone in the 20% slab. That is below inflation. The fund shrinks in real terms, and if you sold equity to build it, you also gave up long-term returns. So size it to your life stage (earning members in the family, responsibilities, health, etc.). If you are still building wealth with goals to fund, six to twelve months is enough in most cases. Think of that as the first layer, held in FDs or liquid funds (or equivalent debt funds). The second layer comes from the rest of your portfolio.
Give Priority to Liquidity
A Rs 3 crore net worth looks decent and comfortable. But if it’s mostly in real estate (like apartment / flat / land plot) or gold, it won’t pay your bills during a forced career break. Property can go quiet for months, and gold usually sells at a discount when you are arm-twisted by circumstances to sell it. So take out some time and sort your net worth into liquid and illiquid assets, and leave your self-occupied home out of the equation. If financial assets are not enough, then you need to do something about it. And soon.
Avoid New Loans
This is a no-brainer, actually. An EMI doesn’t pause when your salary does. Rental yields of 2% to 3% in big cities cover only a fraction of a home loan EMI, so an investment flat is a cash drain, not a cushion. If your job looks exposed, postpone the property purchase until you know where you’ll work and live. Clear your credit card dues and personal loans quickly, since at 20% interest or more they turn a job gap into a debt spiral. Delay upgrades until you can pay for them out of savings.
Get Health/Life Insurance Outside Your Employer
Group health insurance coverage ends the day you leave. If a medical bill lands during a job gap, it can clean out your emergency fund in a week. Buy a personal health policy, ideally a family floater, while you are employed and healthy. Add term cover if anyone depends on your income, and consider a personal accident policy, which is cheap in India.
Cut Down Unnecessary Spendings
Needs no explanation.
That said, you don’t need to predict what AI does. You need to make sure you are not forced to decide things after it does what it will. And for that you need to be prepared.
I leave you with these lines from the poem Preparedness by Edwin Markham: For all your days prepare, and meet them ever alike: When you are the anvil, bear. When you are the hammer, strike.