Facing redundancy? Here’s how to manage your finances

With furlough in the UK coming to an end on 31st October and the current pandemic dragging on, more people are unfortunately facing redundancy.

Since the pandemic hit worldwide, life has changed so much unexpectedly with no end in sight to the restrictions. There has been wave of job losses with companies downsizing their operations with some sadly going into administration.

If you fear the worst about your job or have been let go, then money will understandably be on your mind. Facing redundancy can be an extremely difficult time, only made worse with the pandemic. This may make you feel worried about the future; and uncertainty in how to manage and stretch your personal finance in the future ahead.

Fortunately there are services out there to help, and we will now go through steps in how to stretch your savings during redundancy.

BEFORE

If you feel that you could be at the risk of redundancy, it can help to start preparing for it before it happens. Start by thinking about what you would do if you lost your job tomorrow. We could all do with devising a Plan B – however secure we think our job is.

Review your spending habits

One of the first steps, regardless of your current earnings value, should be to take a hard look at your income and outgoings. Work out how much money you’ll need to cover the essentials, such as mortgage payments, bills and food, each month.

For many, lockdown and working from home have given lots of enforced savings. Despite the doom and gloom, many people have found they are saving hundreds of pounds, and becoming more financially secure as a result. Large expenses such as holidays, commuting costs and entertainment have disappeared following unprecedented social-distancing restrictions – giving households the chance to set aside money during an economically uncertain time.

There may be things you pay for that you don’t need any more, or you may realise you need to chase up a refund or a payment from someone else. Even if you are not making discretionary purchases you can cut, it is worth looking for savings. If you have not been able to put anything away, have a good look at your monthly spending and see if there are ways to cut down costs.

Any financial advisor would suggest that you have three to six months’ money in a bank account that you can access without delay. That’s not the full salary for three to six months, but rather the amount you need in each month to pay for all the essentials.

Price compare to save extra

It is also worth checking that you have the best deal on any of your regular bills to help you save without making sacrifices, including:

  • Mortgage payments
  • Insurance
  • Gas & Electricity
  • Mobile phone
  • Broadband

Using price-comparison sites can help cut down daily bills, where you can search for the goods you want and see where they are cheapest. Do that on the most expensive things you buy, and you may find it is worth shopping somewhere different than normal.

AFTER

Redundancy is a feared word that no employees wishes to hear; but depending on your individual circumstances, so long as you know your rights, take good advice and be proactive then you can protect yourself and turn the situation around to become an opportunity.

Redundancy Pay

It is likely that, as part of a redundancy settlement with your employer, you will receive a lump sum redundancy payment. Even if the amount is not as large, it can still make all the difference to help in the short term. If you receive a lump sum as part of your redundancy package, take time to consider how to use it most effectively.

Leaving it in your current account may not be the best option. It’s easier to spend and the money may not earn as much interest as it could in a savings account. Also, if you already have savings, you might also want to consider using them to pay off debts since the interest rate on borrowing is typically much higher than on savings.

Look into your benefits

In order to offset any financial difficulties while out of work, ensure you claim any benefits you are entitled to. You may be able to claim for council tax and housing costs. Benefits may be dependent on what savings you have.

Tackle problems head on

Despite the best efforts to be prepared, it is possible that following redundancy you will have problems making regular mortgage, loan or credit card payments, as well as paying your bills. It is important that you face these problems head on and deal with them, rather than letting them spiral out of control.

First, prioritise your debts (and regular bills) and deal with the most important ones first. For example, if you have a mortgage, work out what level of protection you have if you were to lose your job. Both private, work-based a government schemes may help. It is likely they will give you somewhere between three- and six-months grace, or at least explore other ways to help you lower or meet your payments.

Look for a new job

For some, redundancy can be a blessing in that they can get out of a job they were not happy in. But usually looking for a new job is not something you imagined doing. It is important to think positive in this situation and be proactive. For example getting your CV updated, asking for references and treat the situation as an opportunity for a new start. If you are lucky to find work quickly, your redundancy payment can be something you can keep to help motivate you.

To be truly prepared, if losing your job’s likely, start living now as if you have already lost it. Cut back on everything and put spare cash away to help you live when there’s less income. This way while you’re living tighter for longer, the depths won’t be as deep.

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