Most times, people don’t know that there is a future possibility of losing their jobs. Certain circumstances may warrant a company to lay off workers at any point in time. The news to downsize the company’s employees often comes unexpectedly. However, there are steps which you can take now to prepare yourself financially for a possible job loss.
Save as much as you can
While you are still working, ensure you save as much as you can. It is important to have a savings plan for a rainy day when money might be needed unexpectedly or in a time of unforeseen difficulty if you have no income coming in. Your cash savings will serve as a backup to see you through emergencies such as job loss, reduced income or illness.
Spend less than you earn and live within your means
Many people are living and piling up debts because they are spending more than they earn. Spending less than you earn frees up the money you need to build up cash savings in your account. By learning to spend less than you earn, you will be surprised how much extra money you can contribute towards saving, attending job interviews and personal development, which are just some costs that come with finding a new job. To “live within your means” implies spending less than your income monthly. This can be a temporary action, while you find another job. And you never know you may see the benefits and decide to keep living this way even after you start working again.
Don’t depend on your credit cards
Using credit cards, overdrafts, loans, and payday loans would only push you to buy more things above your income range. While the use of credit cards can be very helpful when you have no money in savings and need to pay for an essential item, it shouldn’t be a lifestyle. Only use credit cards for essential bills if you really have to. Remember this money will have to be paid back. Spending more than 30% of your credit cards limit may lower your credit score over time. Try to only spend 30% of your credit limit. Knowing how to manage your income will enable you to have control over your financial securities.
Delay big purchases
Big purchases often include luxury items, which are not considered as essential purchases (buying a new TV, shopping spree for a new wardrobe the list goes on). Delaying big purchases will allow you to save enough money to cater for your less-expensive “needs” rather than “wants.” Even if you have to buy the luxury items, save towards it and try to buy at the lowest price possible. The truth is unless what you want is essential, you should really wait for when you can afford to purchase any non-essential items.
Prioritise savings over debt repayment
Although both are important financial goals, prioritising savings over debt repayment is a better option, when facing a possible job loss. Save as much as you can and continue paying the minimum balance until you have a more permanent job and can afford to pay more towards your debt. Be sure to contact your service providers to explain your circumstances and stick to any agreement you have with them. Prioritise savings over debt repayment so that you won't have to fall back on your credit cards if you have any financial emergency. Once you have enough savings, then you can start paying off your debts.
Create a realistic budget and factor expenses while out of work
It is important to plan a budget that is realistic to your financial standing while still working and where you will stand while out of work. List out all your expenses in order of priority and cut out the less important ones. Don’t wait until when the possibility of losing a job comes to reality before you create and start managing your budget.
Couples can switch from living on joint income to a single income
In preparation for a possible job loss, couples who are living on joint income can decide to live on one income, while saving the other income or investing with it. Living on one income is possible with proper budgeting, making cuts, and reducing non-essential spending. In case you are later affected by a job loss, your family will have savings from the other income to fall back on.
Go on a no Spend Budget
A no spend budget is a finance challenge where you decide to spend money on only essential items such as bills, food, saving and paying debts. In your no spend budget, think of what monthly expenses you can do without, think about the ‘nights out’ you can ignore for just a month. Applying the no-spend budget strategy will help you in keeping your spending under control.
Contact your creditors in advance and see how they can help you
If you aren’t able to keep up with your financial obligations, contact your creditors early. You may be eligible for payment agreements to keep your accounts in good condition. Ignoring your creditors will not only raise your balance due to higher interest rates and fees but will also damage your credit report. Explain to them the status of your employment, and negotiate for a possible reduction of interest rates or a shift in the payment schedule.
Review your savings and see how long it will last
You need to do a review of your savings and figure out how long you can go if you are laid off your job. After then, make decisions to pause non-essential spending. Work on saving more money that will be enough to sustain you through a future period of unemployment.
Consider downsizing in advance before your unemployment to save money on future bills
Can you move in with a roommate, rent out a room in your home, or move back in with your parents? Don’t wait too long to take this action. Save yourself the unnecessary stress by knowing what actions you can take in advance. Don’t allow shame or embarrassment to get you into debt, or live a miserable life. You can get through this with ease if you stay true to yourself and act quickly!
Find out what benefits/welfare you are entitled to while out of work
Start researching who you need to contact and at which point. Find out the benefits that are eligible to employees whose jobs are terminated. The Jobseeker’s Allowance claim can be available for you after losing your job and in the course of seeking new employment. You can also have access to Universal Credit, which can help with costs like housing and childcare.
Review your tax and redundancy package
If you are expecting to receive a large payout, review how much tax you may have to pay and how your redundancy package could impact how much benefits you receive and at what point. Redundancy payout can be considered as savings, depending on how much you receive.
Nobody wants to be in the position of losing their job, at least not by choice and definitely not before we are ready to move on. However, this is already thousands of peoples reality and the numbers are expected to go up after Government support reduces. The key to tackling possible job loss is to be informed about your situation, the options and impact. As well as being clear about what you want to get out of it! Staying positive and having mitigations in place will also help you to have the right mindset that is looking for solutions rather than focusing on the problem