Redundancy can be stressful. For many, it will mean your financial situation will change. The best way to prepare yourself is to get a good understanding of your finances as quickly as possible.
You can do that in a few simple steps:
- First and foremost, don’t ignore the problem.
- Spend some time calculating your income and outgoings so you can prioritise important commitments. You should pay all your essential bills first, such as your mortgage, utility bills (electricity, gas, water), insurances, council tax and housekeeping.
- Know your rights. As an employee of any company, you have some basic rights to information and a say in what happens to you. There’s a range of things you should find out such as notice periods, redundancy pay and legal requirements.
- Get some practical help. Understanding your complete financial situation is key to solving any problems you may be experiencing. Your bank is a useful place to seek guidance and support.
- Budget, budget, budget. Cutting costs will relieve some of the financial problems you may face. An easy and simple way to do this is to draw up a budget.
- If you think you may struggle to pay your mortgage, call your mortgage provider right away. They’ll be able to offer advice - the earlier you contact them, the better.
- Find out what you're entitled to. There are various allowances you can claim to tide you over while you look for another job.
If you're struggling with your financial commitments, you should pay all your essential bills first, such as your mortgage, utility bills (electricity, gas, water), insurance, council tax and also housekeeping. You should make sure that you pay these bills before making any payments towards credit cards or loans.
In addition, you should:
- Check whether you can get any state benefits or tax credits that could help to increase your income.
- If you have an insurance policy, such as income protection insurance or mortgage payment protection insurance, check whether this could help with your payments.
- Seek debt advice, such as from the Citizens Advice Bureau, if you would like help managing your finances.
- Make sure you keep all joint mortgage holders, as well as anyone acting as a guarantor on your mortgage, up to date with what is happening.
- Get in touch with creditors early and make them aware of your situation. Find out how you can set up payment plans.
Get some practical help sorting out your finances
Understanding your financial situation fully is key to solving any problems you may be experiencing. Your bank or building society is a useful place to seek guidance and support.
A common mistake people can make is to leave contacting their lender until the situation becomes critical, which reduces the number of options available to them. Letting your lender know early on that you may struggle to make any payments to them because of a change in your circumstances is the first step. There are many things that lenders can do to help you manage your situation so don't be afraid to get in touch with them.
Your bank or building society should be able to provide you with help and guidance if you're experiencing financial difficulties or just want to talk about your financial situation. They can give you a range of practical tools to help review your financial situation and decide what you can do next.
There are a number of ways to reduce your outgoings quickly. Here are some suggestions:
Switch to cheaper utilities
See if there are cheaper options for your gas and electricity service. Also, check whether your utility companies offer discounted rates for payment by Direct Debit.
Check your tax payments and benefits
Sometimes when you're working you can end up paying too much income tax. You should also make sure you claim for any benefits to which you're entitled.
Trim mobile bills
It’s easy to waste money on mobile phone tariffs that don’t meet your actual needs. You could think about a 'pay as you go' deal, so you can’t run up a large bill without realising, and you won’t be locked into a 12 or 18 month deal.
Use comparison websites to make sure you get the best deal on various types of insurance.
Budgeting when you're made redundant
If you’re made redundant, you’ll quickly need to organise your money, whether that's savings or a redundancy settlement, to cover your bills while you look for a new job. An easy and simple way to do this is to draw up a budget plan that shows what you have coming in and what you have to pay out.
Before you start filling in the budget plan, you might want to round up some financial paperwork – recent bank and credit card statements, electricity, gas and phone bills, copies of loan agreements, food shopping receipts, and so on.
When entering your figures, keep in mind that your budget plan is there to help you, so don’t adjust any of your figures to make the situation seem better than it is, or worse - just be as accurate and realistic as you can.
You can use our budget tool to get you started.
Step 1 – List what's coming in
Write down all the money coming into your household each month after tax and any other deductions such as your partner's income, tax credits or child benefit.
Step 2 – Identify your priority outgoings
Priority outgoings are those debt payments that could have immediate serious consequences if they're left unpaid for example, your mortgage or your rent. You should not risk losing your home, for instance, or being without electricity, gas or water.
Listing these priority debts separately from other regular commitments and your everyday spending will help you see at a glance what should be paid first if you are in a position to do so. You can also use this list if you need to contact creditors to work out payment arrangements or repayment holidays. Start with the creditors on this priority debt list first.
Step 3 – Record everyday outgoings
The regular outgoings you and your family have as a household will also be an important consideration if you're out of work. In a separate column (call it ‘Housekeeping’ or 'Everyday spending'), write down all your household’s basic living expenses. Include all essential household spending, such as your weekly food shopping, petrol, etc. (Save any other debt repayments such as credit cards and personal loans for the next step.)
A quick and easy way to see if you can save money is to look at one of the many comparison websites and see if can reduce your bills. There are many that specialise in household bills, insurances, protection cover, broadband, credit cards and so on. So, it's definitely worth taking the time to see what you can save.
Step 4 – Work out how much you owe your creditors
Enter a total for all your other debt payments and your monthly payments to loans, credit cards and other credit debts.
Step 5 – Examine the difference
Once you have all your income and outgoings listed, you can see what the difference will be. A good way to check that you’ve included everything is to check the ‘total debits’ versus ‘total credits’ on your monthly statements.
Step 6 - Make contact with creditors
It’s always advisable to contact the companies you owe money to as soon as possible and explain your new financial situation to them.
All regulated lending companies have plans in place to deal with this situation, and it's in their interest to help you. Many lenders are willing to discuss reasonable terms of repayment if you are willing to repay what you can afford on a regular basis.
If you have real worries about how you’re going to cope, you might want to consult a third party so you can talk to an independent advisor.
Financial Conduct Authority
This is a government organisation that offers impartial help to consumers on all money matters.
Go to the Consumer section of their website and look for the link to the Money Advice Service or try their Consumer Helpline on 0800 111 6768, between 8am and 6pm Monday to Friday, or Typetalk on 18001 0800 111 6768.
Citizens Advice Bureau
They provide free, confidential, impartial information and advice on a wide range of debt and benefit issues face to face. For your nearest Citizens Advice Bureau, check your local phone book or Yellow Pages. Or go to www.citizensadvice.org.uk for England and Wales or www.cas.org.uk for Scotland.
The National Debtline
This is a national telephone helpline for people struggling with debt. National Debtline can also send you a free debt advice pack, with guidance on completing a personal budget, samples of letters to creditors, and information on legal questions connected with debt.
This is a network that supports free advice providers and can give details of your nearest debt advice centre. Call AdviceUK on 020 7469 5700, 8:30am to 5pm Monday to Friday.
Run by the government, this website provides a wide range of news and information and has a specific section on redundancy. Visit: Directgov.
Your local council
Many local authorities offer debt advice services. To call and check with yours, look under 'Local Government' in the phone book.
For enquiries about benefits, look under 'Job Centre' in the phone book or visit https://los.direct.gov.uk/ to find your nearest office.
The Pension Service
For pension enquiries, call 0345 606 0265.