Redundancy can be one of the most frightening and uncertain obstacles of your career. It’s overwhelming to lose the economic security of your job, especially in a time of global economic instability.
We’ve compiled 5 tips to help you tackle your finances, so that you and your loved ones can survive redundancy and weather the storm whilst you make decisions about how to find another role following your redundancy.
Along with the stress, anxiety and grief you might feel after losing your job, it’s likely you’ll have the added stress of financial anxiety. Luckily, our expert advisors at Talent Financial Planning can help you with a redundancy survival plan.
Our short-term financial plan for surviving redundancy focuses on five key areas.
1. Identify the income you’ll continue receiving
If you don’t have a new role to step into immediately after leaving work, you’ll want to identify and evaluate any other sources of regular income. Most of us are dependent solely upon our monthly employment income, but are there any other investments, pensions or savings that could provide you with a temporary income stream?
Questions to ask: where else might I be able to secure regular income? Can I draw money from my pension plan? Do I have access to any savings (instant access ISAs etc.)?
2. Understand and minimise your spending
Now you have an understanding of the financial resources available to you, it’s time to look at your current spending. What’s essential and where could you make cutbacks?
Take the last three months as your starting point and calculate exactly how much your essential outgoings are each month – mortgage repayments or rent, utility bills, vehicle running costs, credit card repayments etc. Note down all of your other regular outgoings too until you have a thorough list of all your core essential spending and extras. In the age of contactless card payments and credit cards, we all spend more than we realise!
Next, study your list and determine which regular outgoings are not essential. Maybe you signed up for a gym in January and have never been back since? Or perhaps you could sacrifice premium TV streaming until you can secure another job? You might find an online budget planner such as https://www.youneedabudget.com will help you to get a handle on your spending habits.
Any payments that you can stop in the short-term will help you to reclaim financial security. Remember, any payments you make into your pension or for your children’s savings can be restarted as soon as you find secure employment again.
Questions to ask: What are my core essentials – what would be the consequences of stopping this payment? What additional spending do I want to prioritise? How much do I need to save to secure my finances for the next 3 months?
3. Know which benefits you’re entitled to
When your employment circumstances change, you may become eligible for state benefits such as jobseeker’s allowance or Universal Credit. However, the benefits system is complex, and you may not be entitled to as much financial support as you need to maintain your current lifestyle. Therefore, it’s important that you have your own personal financial plan that you feel you have control over where possible. If you are eligible for benefits, these can boost your income to help you make up the difference.
Questions to ask: What benefits am I entitled to? You can use an online benefits calculator https://www.entitledto.co.uk to help with this or visit your local Citizens’ Advice Bureau for free advice.
4. Make sure you’re aware of your accessible savings, investments and pensions
Still looking for additional sources of income? Once you’ve worked out what your regular income and outgoings are, you’ll want to start maximising your income stream. That means gathering as much information as possible about all of your accessible savings, investments and pensions.
Instant access cash ISAs and savings accounts could provide you with a temporary source of income to make ends meet and alleviate your financial anxiety after redundancy. Remember, when you’re in a stronger financial position after securing your next job, you can always replace any money you borrow from your savings. It’s a short-term solution to secure your finances following redundancy.
If you’re over 55, you might want to consider drawing money from your pension plan. This supplementary income can provide a short-term solution to support your income whilst you look for your next opportunity. However, you will in effect be borrowing against your financial future by withdrawing money from your retirement savings. You should bear in mind that withdrawing money from your pension should be considered as a last resort as not only are you borrowing against your future financial security by taking money from your pension but you may restrict your ability to replenish your pension savings once things improve as future pension contributions become restricted by the Money Purchase Annual Allowance (MPAA) meaning you may not be able to make the necessary level of tax relievable future pension contributions to fully replace the amount you have withdrawn.
Questions to ask: How much do you have? How long would your savings last if you had to live off them for a while? Which income source would you access first? Which savings would you want to avoid borrowing from?
5. Explore your insurance policies
Finally, look at your insurance policies and identify any payment protection or mortgage protection insurance policies. PPI may be attached to personal loans, credit cards or mortgages. You can also check if you have any Accident, Sickness & Unemployment policies attached to any of your regular outgoings (e.g. mortgage).
Contact your insurance companies to inform them that you need to make a claim. They will require evidence of your redundancy, and you’ll want to find out what the typical waiting period is between making a claim and receiving the pay-out. Once payments start, they will pay you an income for up to 2 years, or until you return to paid work.
Questions to ask: What policies do I have and which regular outgoings are they attached to? What is the waiting time for payments to start? How much am I entitled to and how will this impact my short-term financial plan?
A bright financial future with expert planning
After following these 5 steps to secure your finances following redundancy, you’ll be able to identify whether you have enough money to support you and your family. You’ll also have developed a list of changes you’ll need to make to your spending habits in order to get by in the next few months.
Making a short-time financial plan to cope with the economic impact of redundancy is crucial to alleviating your financial worries. Doing so frees you up to start thinking about the next chapter of your career, free from the financial worries that would otherwise hold you back.
Redundancy can be an anxiety-inducing experience. But with the right tools and advice from one of our expert financial planners, it can help you make positive changes to your life. When you have a grip on your finances following redundancy, you can work with one of our financial planners to start building the future you want.
Whether you want to retire earlier than expected or start securing your family’s future with a tailored savings plan, Talent Financial Planning can help you to get your finances on-track.
We use wealth forecasting to test what would happen to your personal wealth based on different scenarios. Then we help you make informed decisions about your money and your financial future. We’re here to support you through big life events like selling your business, planning for retirement or saving for your children to go to university. No matter the scenario, our professional and friendly advisors bring their decades of experience to each client, giving you confidence in your financial outlook.
If you would like clear, practical guidance in planning your best financial future, get in touch and speak to one of our expert financial planners.