Redundancy can be difficult emotionally and financially at any time, but right now, with a tough employment market, it can feel like a bigger blow. If you have been made redundant during COVID-19, it’s important that you take steps to manage the financial and emotional impact.
Here are our tips for managing a redundancy.
#1 Discuss timing with your employer
With the end of the financial year almost upon us, if you’re facing redundancy right now, it’s worth asking your employer whether they can make it effective from 1 July. This will put your redundancy payment into the 2020/2021 tax year and may reduce your tax liabilities, particularly if you don’t find another job straight away.
#2 Plan and budget
Unemployment is on the rise and many companies aren’t hiring as a result of COVID-19, so you may not secure employment as quickly as you may have in the past. Taking a look at your expenses to find places where you can cut costs right now is critical. It’s the first step we take with all our clients, and many are surprised at where costs can be cut with little or no lifestyle impact.
Things like cancelling subscription services that you don’t use, or even talking to your utilities provider or lender to get a better deal are easy ways to get started. You can read all our tips for managing your budget in a crisis here.
Setting a budget may feel like a tedious task, but it’s a critical one if you are going to protect your finances during today’s uncertainty. To start your planning, you can download our free budget planner here.
#3 Explore support options
From government stimulus packages to provider hardship clauses, there are many options out there that can help you right now, and you should consider making use of them. Accessing your super or pausing your mortgage repayments aren’t decisions to be made lightly, but they can be a lifeline for people who have lost their income, so it’s worth exploring your options.
Your employer may also offer you access to support services to help you make the transition. From recruitment and training support to financial planning and advice, you should make use of whatever is on offer.
#4 Maximise your payout
There are many ways you can put your redundancy payment to use, but it’s critical that you don’t make rash or ill-informed decisions. In our current job market, it may take a little longer to find your next role, so it’s worthwhile planning for how you can make the money last and make it work for you.
With such low interest rates right now, leaving money in the bank isn’t the best strategy for maximising your funds, but you should make sure you have easy access to the funds to cover your living expenses for around six months.
If you have this in hand, then you can look at other tax-effective investment options, like superannuation. It’s worth also making sure that your super is structured to weather financial storms so that you can make the most of your contribution and protect your future. If you are in a couple, equalising your partner’s super may also be a way to minimise your tax liability.
For those of you with debt, using any excess funds to pay this off might be boring, but it is a winning strategy, as it can help you minimise your costs of living today and get ahead tomorrow.
#5 See the opportunity
While it can be a very emotional time, it’s important to remember that employers all over the globe have had to make tough decisions right now, and your redundancy isn’t a reflection on your skills or your worth.
Many of us have dreamed of transitioning to a different career or studying something new and your redundancy may have presented an opportunity to explore that. Reach out to recruiters to find out what skills employers are looking for in your current industry or the one you’d like to be in and look for opportunities to build those skills. There are many free online courses right now, even some offered by prestigious universities, so you can start learning without incurring costs, and you may just find a career option you hadn’t previously considered.
Your future earning potential is one of your biggest assets, so using this time to maximise it can be a good financial decision while also helping you focus on your next career move.
Financial uncertainty is common with redundancies, and it may be exacerbated with the challenges of COVID-19. Seeking expert advice can be a great way to ease the burden, helping you take and stay in control of your finances. The right financial adviser can help you navigate cash flow planning, make tax-effective investments and explore financial hardship assistance to ensure you can live for today while planning for tomorrow.
If you’ve been made redundant, contact Apt today to find out how we can help you make your next move the right one.
General Advice warning
The information provided in this blog does not constitute ﬁnancial product advice. The information is of a general nature only and does not take into account your individual objectives, ﬁnancial situation or needs. It should not be used, relied upon, or treated as a substitute for speciﬁc professional advice. Apt Wealth Partners (AFSL and ACL 436121 ABN 49 159 583 847) and Apt Wealth Home Loans (powered by Smartline ACL 385325) recommends that you obtain professional advice before making any decision in relation to your particular requirements or circumstances.