Being made redundant can be an alarming thing to happen in a person’s life, but there are ways to lighten the load.
ipac financial expert Colin Lewis says that a large part of giving financial advice to people who are going through redundancy is encouraging them to look at the big picture and realise that with some smart financial planning, it isn’t so bad.
“There’s a lot of emotion around it as you can appreciate – and people don’t generally think of their finances,” he explains.
“If they can step back and do a few things with their finances and their payout, it can alleviate that pressure a little bit.”
where do I start?
Mr Lewis says that the best thing you can do after you’ve been made redundant is to plan out the optimal way to use your payout before you start spending money.
“Okay, you’re going to get a payout and that is to compensate for the loss of your job, why not put that money in the bank and draw on it as regular income?”
The head of technical services says that often people will look to their mortgage first and use a large chunk of payment on that – a strategy that could lead to problems in the near future.
“If they are going to do something like that, we would suggest putting it into their offset or a redraw account so it’s still benefiting in that it is reducing the interest cost on their loans but they still got access to that money if they need it.”
While it can be a knee-jerk reaction to try to pay down your largest debt, Mr Lewis recommends securing a cashflow so that you can take the time you need to figure out what you want to do.
Waiting periods for settlement entitlement can also put the pressure on, so focusing on the day-to-day is a big part of getting through the tough times.
Since redundancy has so much emotion attached to it, people can overreact and make big decisions without really thinking them through.
“It’s simple things that can really help. Like just budgeting and cashflow – nothing fancy like investments and paying off mortgages – just doing the basics right at the outset.”