There’s a lot to think about if you’ve recently been made redundant. You may be lucky and pick up a job pretty quickly, but for most people it takes some time to secure new employment. For this reason it’s vital to ensure that your finances are in order, and you know how much you can afford to spend each week. Here are some top tips for managing your money while you’re between jobs.
Getting your benefits
The first thing to do when you’ve been made redundant is to look into any benefits you’re entitled to. These don’t start and end with Jobseeker’s Allowance and Universal Credit (if this has been rolled out in your area). You might be able to claim back some of the tax you paid while you were working. If your income is low, you could also get Housing Benefit and support to help pay Council Tax, among other benefits. Use the government’s benefits tool to see what you’re entitled to. If you live in Northern Ireland, check out your entitlements here. It’s important to think about your pension too. Even if you’ve got a big redundancy pay out, by claiming Jobseeker’s Allowance you will continue to get National Insurance credits that contribute towards the State Pension entitlement on retirement.
Are you protected?
You may have an insurance policy that protects your income and mortgage payments in the event of redundancy, such as payment protection insurance. If you do, make sure you dig it out and check whether you can make a claim. Some people that have PPI may not remember taking it out. This is because PPI has been widely mis-sold, frequently being added to mortgages, loans or credit cards. If you find that you have PPI, and your claim is rejected, you may be entitled to compensation.
Time to budget
It can take time to claim benefits and insurance, so it’s best to act early. It’s also essential to scrutinise your finances at the first opportunity and make an appropriate budget plan so that you don’t spend more than you can afford. Money is probably going to be much tighter than it was when you were working, so you will probably need to identify expenses that you can cut back on. These could include cancelling direct debits that you don’t need (such as magazine subscriptions) and getting refunds for transport season tickets you’ll not use.
Also look to make lifestyle changes – perhaps shopping at less expensive supermarkets and scaling back on meals out. The Money Advice Service cut-back calculator can help here.
Budgeting isn’t fun, but running out of money is worse. Credit cards and loans can help, but it’s important to shop around for the best deals, and ensure that you make more than the minimum required repayments on time.
Don’t blow your redundancy pay
Your redundancy pay-out should help you get through a period of unemployment, but how long it lasts will depend on the amount you get, and your spending habits. It might be a tidy sum, but don’t be tempted to treat yourself too much, as you may need it to pay for emergencies, such as fixing a boiler, or to fund essential purchases, like car insurance.
Training and qualifications
If you’re looking to move into a completely different line of work, you may benefit from (or require) some training or specialist qualifications. You can find out what courses are run in your area, as well as more general information on job prospects by contacting a government advice service, such as the National Careers Service, Career Wales, Skills Development Scotland or NIdirect.
Even with your budget sorted out and your redundancy package earning interest in a savings account, you may still not have enough spare money to undertake any retraining or studying that would benefit your new career.
If this is the case, don’t be discouraged. There are solutions in place to help, including student loans, 24+ advanced learning loans, and professional and career development loans that offer between £300 and £10,000.
Is part-time work an option?
More and more people are opting to work part-time, with some juggling several jobs. This can prove a great opportunity for new parents, who want to keep a foot in the employment door, and for anyone thinking of changing career. You can pick up some great experience, and always move on if a full-time position emerges. Find out more here
Become your own boss
Finally, if you find yourself unemployed consider whether it’s the right time to go self-employed. Working for yourself can be highly rewarding, but as many new ventures go bust you’ll need to plan ahead and get the best advice you can. Check out Gov.uk, Business Wales, Business Gateway in Scotland and InvestNI for more information on being your own boss.
Redundancy is often an unpleasant and daunting experience, but with it comes the opportunity to try something new. Having a financial plan in place will also make this time less stressful and allow you to focus on finding the right job for you.
Information accurate as of 23/07/2013
This article is provided by the Money Advice Service.