Financial Planning during Redundancy
Printed from www.survivingredundancy.ie Copyright © 2012
- This article was written by Brendan Burgess. If you have any corrections or suggestions to improve the article, please email him at brendan@thepanel.com
- Talk to your mortgage lender immediately and try to reschedule your mortgage. Don't be afraid to talk to them - they are used to people losing their job.
- The exact date of your redundancy is important. An extra few days might well qualify for you for additional benefit. For more details check out this article.
- Open a savings account with the Credit Union. It might come in handy.
- Don't make any further AVCs to your pension scheme until you are back on your feet.
- Get a list of all standing orders and direct debits from your bank and cancel any discretionary ones.
Financial planning should start when you first become aware that you might lose your job. And for many people in Ireland today, there is a risk that they might lose their job whether or not their employer has given them formal notice.
Financial planning cannot solve the problem of loss of income that that long-term unemployment brings, but it can help you survive a period of short-term unemployment and retain your credit rating with the banks.
As soon as you are at risk of becoming redundant
- Talk to your mortgage lender
- Start doing a household budget - cut out discretionary expenditure
- Open an account with your local credit union
- Make an appointment with MABS - it can take a few months to get an appointment. You can cancel it if you don't need it.
Investing your redundancy payment
- You want to get a trade-off between paying off borrowings and having a fund available if you are unemployed for a long time.
- As a general guide, pay off your credit card in full. This is very expensive short-term debt. It can cost as much as 19% and also there can be penalties imposed for missed repayments.
- If you have an expensive car loan, see if you can make a payment off it but check that there are no early repayment penalties.
- It is probably not a good idea to make a capital repayment on your mortgage. The interest rate is so low on many mortgages, that it is possible to get a higher interest rate by depositing the money. This is dealt with in more detail in the article on mortgages.
- You might also need the money for other purposes - to pay rent while you move to a new location.
Cutting day to day expenditure
- Make your lunch instead of eating out
- Check your standing orders and direct debits - are you still donating to some worthless charity which mugged you on the street during the Celtic Tiger?
- Get in a tenant under the Rent a Room scheme
- Shop in Lidl or Aldi instead of Marks & Spencer or Superquinn
- Get rid of Sky + and other expensive subscriptions
- Do up a budget
- Tear up your credit card or lock it away
- Drink tap water instead of bottled water
There is a full discussion of money-saving tips on Askaboutmoney.com
Do a complete review of your finances
- Do a complete review of your taxes. Most people don't claim all the credits they are due.
- Review your investments. Are you exposed to too much risk for your current level of income?
- If you have an invesment property, you should consider disposing of it.
- Consider getting a tenant under the Rent a Room scheme.
- Review your life insurance - shop around at next renewal date
- Review your pension arrangements - in particular stop contributing to a pension scheme if you don't have income which is taxable at the top rate
Things to avoid
- Consolidating loans into long term more expensive loans
- Dealing with professional debt managers
- Investing in businesses which are scams
