20th August 2020 | 5 minute read

How to make your finances resilient to redundancy

If you fear or are already facing redundancy, making changes to your finances sooner rather than later can help you survive. Plus, with your finances in order, there’ll be one less thing to worry about should the worst happen and you can focus your energy on replacing your income.

Understand every last aspect of your outgoings

Make sure you know exactly how much you are currently spending and what you are spending it on. Use your bank account and credit card statements to itemise everything and split it into essential and non-essential items. This will help you to decide what you do and do not need to spend money on, as well as highlighting just how much you are spending in particular areas. If you can stop spending on certain items altogether, do it. You might not even miss those things in the end.

Money Helper has an easy to use budget planner tool for further help.

Have a deal and switching blitz

It can be time-consuming, even with the help of price comparison sites, but it’s worth your effort to help you get in the best financial shape possible. Use your budget and go through each in turn to see if you can get better deals. For example, can you reduce your TV package or use pay as you go options instead? Have you been using your car less? If so, you may be able to reduce your annual mileage and bring down the cost of car insurance.

Get in control of your debt

There are two key aspects here.

  1. First is ensuring you have the best products available to you with the lowest interest rates and fees. As with your other outgoings, put the effort into finding the best deals you are eligible for. Personal loans are often much cheaper than credit cards though you must pay back every month. If you can switch to a 0% credit card, this may give you the breathing space to pay more of your debt off without continuing to rack up interest. It may be more difficult to switch lenders after redundancy so it’s important to get this in order.

  2. Second is to pay back as much as you can afford, without leaving yourself overly-exposed to an unexpected bill. The more you pay now, the less you will pay overall and you should pay the most expensive debts first.

To make sure you always Borrow Well, soon ilumoni will be able to do this for you, helping you to reduce the interest you pay and clear your debt faster. To hear more about our app, register your interest and we’ll keep you up to date. The app is completely free, completely secure and you are under no obligation to share or do anything you don’t want to.

If you think you may lose your income, try to avoid borrowing any more. If you need to in order to live day-to-day, seek advice from one of the organisations below.

Build up some savings

If you can, build some reserves so that you can deal with the immediate aftermath of redundancy – ideally three to six months of essential living expenses, but whatever you can save will help you.

If you are made redundant, here’s what you need to do:

Check your insurances

If you have payment protection insurance (PPI), short-term income protection or mortgage payment protection you may be able to claim. But if you know you are at risk of redundancy, it’s too late to take out these products.

Know your benefits

Get a clear picture of the benefits you may be entitled to and claim them. Benefits can include jobseeker’s allowance, housing benefit if you are renting or Support for Mortgage Interest, universal credit, child benefits and more. The government website has information about benefits calculators and organisations that can help you with benefits and access to other grants. You may also be entitled to tax rebates on earnings you have already paid PAYE on.

Talk to all of the people you pay money to

You may be able to get payment holidays or temporary interest-only mortgage arrangements from lenders, or support with water and council tax. You can also ask your energy providers for help to pay the bill or even with more energy-efficient white goods.

If you haven’t already, make your budget, cut back spending to essentials and get switching. It’s important to prioritise any debt to do with your home, such as your mortgage or rent, utility bills and council tax. You can then look at unsecured debts. If you are on a debt management plan, talk to the organisation that helped you.

Look at other ways to make money

You could rent out your spare room – there are tax breaks available. Or, if you live near a station or town/city centre, you could rent out your drive for parking – there are websites that you can advertise on that will administer it all for you.

Have a good sort out and sell anything you no longer want or need and get creative with your income-generating ideas. Could any of your hobbies or skills turn into a way to earn? Could you learn a new skill that could turn into income?

But do make sure you are up to speed with how and when to declare your income for tax.

Decide what to do with any redundancy pay

If you have been with your employer for two years or more, you should be entitled to redundancy pay and if you have been on furlough, this should be based on what you would normally have earned rather than your furlough payment.

Depending upon how long you’ve been working and whether your employer offers more than statutory redundancy, you may get a decent lump sum and you’ll need to think carefully about how best to use it.

If you have debts to pay, using some of your lump sum could help you reduce the burden of debt and bring you under the thresholds for benefits. Striking the right balance between having a nest egg for living expenses and getting rid of expensive debts is key.

Look after your mental health

Redundancy can be stressful but remember, roles are made redundant, not people - there is no shame in redundancy or suffering with mental health issues, so do seek help if you need it. You can find organisations to support you further on our Debt Helplines page.

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