Creating a redundancy finance plan
You may have saved money on travel, holidays, and other non-essentials during the lockdown. It’s generally recommended that you have sufficient funds set aside in an instant access account to meet your essential outgoings for at least three months. Being made redundant will impact on people in different ways. You should adapt your redundancy back up plan to your situation:
Replacing your job? You might just want to find another job as quickly as possible. If this is the case you can use this situation to take-stock and review your spending. If you have savings ensure you access those emergency funds in the most tax efficient way possible. You should then take a look at any remaining money being invested or put towards your retirement plan. Leaving money in the bank could be very costly to you. We will take a look at how you utilise your tax allowances and how you can invest your redundancy pay.
At retirement age? If you are at retirement age or a few years younger you might want to look at whether your redundancy pay could be used as an added cash bonus to fund your retirement. This article will explain how you can best utilise pension tax allowances and invest your redundancy pay to later draw upon an income.
Looking for a new direction? Some people use redundancy as an opportunity to change career or become self-employed and a lump sum payment could provide some much needed cash for the short-term. We ill take a look at how claiming for benefits can be an advantage for aspiring entrepreneurs.
Review your finances now
Your main concern with being made redundant is how you are going to keep up with the bills, costs around the home, looking after your family and dealing with debt repayments. Try not to panic, the best thing you can do is sit down and get a grip of your income against outgoings. Your bank may have an app to help you but here are a few things to get you going:
- Start with your biggest outgoings, for most people this will be the mortgage. Work out how many monthly repayments your redundancy package, combined with savings, will last.
- Contact lenders as they will normally allow borrowers to switch to interest-only repayments for a limited time period, which will reduce monthly bills.
- Go through all of your direct debits and work out what could be cancelled or moved to a cheaper deal.
- Look at the order of outstanding debt and when it needs to repaid, with expensive debt such as credit cards being tackled first.
- Budget for the essential items such as your mortgage, food, utilities, and car insurance.
- If you can live without something cut back on that outgoing cost
Check out our guide to financial planning to understand all the areas you could look at when planning your own finances.