With the shock collapse of Thomas Cook, leaving over 21,000 people now facing certain redundancy and countless thousands working in support industries with an equally uncertain future, I thought that I might share some thoughts on what to do if you are facing immediate redundancy.
What to do right now
Finding yourself facing redundancy may have a profound psychological effect upon you, but it’s also a time when you need to be strong and take some immediate action.
If you are being made redundant, then you should spend today doing the following things as a matter of urgency. Taking back control of things starts here:
Claim everything you are entitled to. Nobody want’s to sign on, but you’ve been paying into the system; and it’s there for your benefit too. So sign on today, as you may be eligible to claim benefits such as Universal Credit, whilst you are looking for a new job.
There are also other benefits such as Housing Benefits, Council Tax Reductions, Jobseeker’s Allowance and Tax Credits that may be available to you. Here’s a link to the Citizens Advice Benefit Checker, that will quickly show you what benefits you are entitled to:
Deal with your mortgage. As you won’t know just how long you will be without an income, notify your mortgage lender (and other lenders) today. That way, if you have problems keeping up payments, they will likely work with you to overcome short-term difficulties and may offer things like payment holidays, or a switch to interest only repayments. They are usually helpful and sympathetic, but they can only offer assistance if they are aware of what’s going on – so tell them as quickly as possible.
Claim on any policies. If you took out insurance against being made redundant, that should cover your mortgage and loan repayments, so claim today. The process of being paid out may take some time, so start the ball rolling now, to help avoid missed payments whilst you wait for the insurance money.
Work out your budget. Calculate what your assets and liabilities are, along with other household income and expenditure. That way you’ll get a clear picture of your current financial standing. Cut any unnecessary expenditure and prioritise remaining expenses in order of importance. Knowing exactly where you are financially will significantly help with any negative emotions you may be having.
Once you’ve done the basics, then it’s time to tackle the rest
I can’t stress how important it is to have done the above points – for both your financial and mental health. Once you’ve dealt with immediate actions, then it’s time to think about the following:
Get professional advice. If the whole situation seems daunting, reach out for some help. Talk to a properly qualified financial planner. You don’t know what you don’t know – and getting expert advice could save you a great deal of stress and money.
Clear existing debts. If you can, clear any outstanding credit cards or loans. Especially because the cost of most debts vastly exceeds any interest you’ll be earning on savings.
But keep access to emergency funds just in case you need them.
Those you can’t clear, move to the cheapest rate. Your credit score may take a post redundancy knock, so now’s the time to move debt to the best possible rate, such as the interest free balance transfers of certain credit cards
Once you’ve received your redundancy payment
Following the receipt of your final lump sum, there are one or two things you may want to consider.
Top up your pension. You could choose to take advantage of the tax relief available on the first £30,000, as you top up your existing pension from your redundancy payment.
Invest for your future. If you cleared your debts, and have a nest egg, you may want to consider your redundancy payment as a windfall and use it to make some longer-term investments.
Early retirement. You may even be in a position that your financial situation allows you to consider an early retirement, or at least a significant step away from the world of work.
Redundancy is a strange and stressful time
Facing redundancy can be emotionally draining and it’s easy to try to avoid meeting it head on. However, if you want to lessen the impact it may have on you, both psychologically and financially, then early planning and preparation is the answer.
Sorting out your existing finances and planning for the short and long-term future are fundamental and very wise moves. Talk to your financial adviser about the points I’ve highlighted in this blog. Then explore those areas of your individual finances that will also be impacted.
It’s not the end of the world, on the contrary, it’s a new beginning; and taking charge of the situation is your first step down the road to a brighter future.
As always, if you have any questions regarding your current or future financial situation, especially if you think that redundancy may be a future possibility, then please contact us at Bridgewater Financial Services where we will be delighted to help guide you through your individual options and strategies.