Redundancy is one of the biggest bumps in the road life can throw at you, so here are our 5 top tips to help your finances survive redundancy.
It can be overwhelming when your financial future becomes uncertain, but there are steps you can take to make sure you stay afloat whilst you decide on where you want to focus your energy next.
It’s more than likely the main thing you’ll be worried about to start with if you are in this situation, is how you’re going to survive financially.
To tackle that, you need a clear financial plan for the short term, that you can stick to. Here are the five key areas to look at…
Identify the income still coming in
The first step is to identify what income you’ll have after you’ve left work, assuming you don’t have a new role lined up immediately.
Most people tend to just have their employment income coming in each month, but is there anything else that could provide you with an income stream? Do you have any existing investments or pots of money you could utilise?
Explore your benefit entitlements
Your change in circumstances means that you could be eligible for certain state benefits, the main one being jobseeker’s allowance. For an idea of what you could apply for, use an online benefits calculator. But be aware that the benefits system is complex and it’s much better to make sure you’ve got a robust plan under YOUR control rather than relying on benefits. If you will be eligible for benefits, you can look at these as a small bonus.
Understand and minimise your spending
Look at your spending for the last three months to get a good understanding of just how much your essential outgoings are each month (mortgage repayments, utility bills, vehicle running costs, etc.). What are your other regular outgoings? Write absolutely everything down. We all spend more than we realise! Scrutinise your list, deciding what is essential, and what is not. Where can you make savings realistically that are sustainable? Maybe the membership for the gym you never go to or the TV package you hardly use, for example. Using an online budget planner will help provide a detailed breakdown of your spending.
Go through the payments you’d be prepared to stop in the short term, whilst you get yourself sorted out. That could be anything from cutting back on regular dinners out and weekends away, to the regular investments to your children’s Junior ISAs, or your own pension contributions. Remember this is a short-term step until life settles down again.
Gather details of your accessible savings, investments and pensions
How much do you have? How long would it last if you needed to live off it for a while? What would you use first?
Look at what you have in savings and investments that you can access at short notice. If you’re over 55, you should look at your pensions too, because many can be accessed from that age.
Don’t forget to consider any package or settlement you’ll be receiving.
Make a claim on payment protection or accident, sickness and unemployment policies in place
Lastly, go through your insurance policies. Look for any payment protection or mortgage protection insurance policies (also called PPI) which may be attached to any loans, credit card or mortgages. Also, check if you have any Accident Sickness & Unemployment policies in place.
Now is the time to contact the insurance companies and tell them you need to make a claim. Be prepared to give them evidence, and check with them what their waiting period is. Most plans have a minimum waiting period before they will pay any income out. But once payments start, they will pay you an income for up to 2 years or until you return to paid work.
Take a step back
After taking these five steps to help your finances survive redundancy, you’ll see whether you have enough money to support you and your family right now and what you need to change to get by in the short term.
Now that you know what you need to do to secure your immediate financial situation, you can start thinking about what you want to do in the next chapter of your life.
More often than not, you can see this situation as a fresh start, providing new possibilities. It can give you the push to make a positive change in your life. Perhaps one of your life goals is to retire earlier than you expected, apply for your dream job or start your own business, then this could be the catalyst you were waiting for.
A professional Financial Planner will use wealth forecasting to test different scenarios and help you decide on your next steps. They are there to support you through big life events and provide you with confidence in your financial outlook.