Last week I was made redundant due to offshoring. If you have ever been through redundancy you will know that this is a very stressful situation, which can bring worry and strain about losing a steady income. Whilst I had worked at the company for over just over 3 years, I knew my payout was not going to be a particularly large sum of money because I was on a low income. Nevertheless it was still important to work out a plan of attack of what to do with it.
Here is what I did below which may help you if you are going through a similar situation.
Budgeting to make your redundancy last
The most important thing you can do is sit down and work out a budget. How much money will you need for day-to-day living expenses? How long will your payout last based on this? What large bills may come up in the next couple of months you need to account for? Whilst it is tempting to go blow the cash on something like a holiday, you need to look ahead because you do not know when your next pay day might come.
Pay off debts with your redundancy money
A couple of weeks before I finished work I started to throw large portions of my wage onto the remaining credit card balance I had. It was only small but I wanted to clear it and close the card so that I did not have to use any of my redundancy money paying it off. By closing it I also eliminated any temptation that may arise when I do not have an income to pay off expenses.
Put it on your mortgage
Because our mortgage is still quite large, we accrue masses of interest every year. I decided to put the bulk of my payout money onto our mortgage to reduce this. I only recommend this if you have an offset account or a free redraw facility where you can still access the money if you are desperate.
Again, some people can take months and even years to find a new job so you still need to make sure the money is accessible so your personal finances are liquid and not requiring more credit.
Putting your redundancy payment into a high interest savings account
Money is always better off being against your mortgage than anywhere else however if you are like me, you still need to have a bit of money easily accessible to pay off any direct debits or day to day bills and living expenses that may be coming out of your account.
So whilst the bulk is on my mortgage I put a small portion into a high interest savings account which I can easily transfer into my transaction account when I need it. Before I did this, I investigated which product has the higher interest rates and ended up opening a UBank account – you can read why I chose UBank by clicking here.
You may as well earn as much as you can on your money, rather than leaving it in your transaction account which earns you no interest.
The most important aspect is sticking to your plan. It is so easy when you have money to spend money but you really need to have a game plan for your redundancy payout as a backup in case you run into trouble.
Things always come up unexpectedly (for instance my parents in law house started flooding and now they need $20,000 to fix it). As you don’t know where your next pay check is coming from make sure you are smart with the money and really think about what you will need to survive over the short term and longer term (should your job hunting start to slow).