8 Ways to Prepare for Losing Your Job, According to a Financial Adviser

8 Ways to Prepare for Losing Your Job, According to a Financial Adviser
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The pandemic has brought with it a dire jobs landscape, where hundreds of thousands of Aussies are out of work, vacancies have suffered a record fall and even those still employed are fearing dropping out of the workforce. With so much uncertainty in the air, it’s never a bad idea to prepare for the worst, including the possibility of a job loss.

More than 800,000 Australians have lost their jobs since the pandemic began, and as many as 2.4 million have drawn on their superannuation already. The country’s effective unemployment sits at 13.3 per cent according to Treasurer Josh Frydenberg — nearly twice the official figure of 7.1 per cent — and the latest stats from the Australian Bureau of Statistics show the number of job vacancies fell by 43 per cent in the May 2020 quarter.

Suffice to say, things aren’t looking good.

Helen Baker, licensed financial adviser and spokesperson at Money.com.au, explained that if JobKeeper payments end in September as originally planned, we’re likely to see further layoffs, and those who have been lucky enough not to feel the brunt of the pandemic may see their circumstances quickly change.

“Aussies should get on top of their finances now to prepare for a risk in loss of income,” Baker said in a media release.

“This could include finding ways to pay down debts faster, building an emergency fund, and creating a second income stream. I recommend households use financial tools such as the free Money.com.au budget spreadsheet to get a realistic view of their expenditure against their income and help get on top of their finances now.”

Create a six-month emergency fund

If things were normal, Baker would have recommended creating a household emergency buffer to cover three months worth of expenses, including debts and general living costs.

But in the COVID-19 environment things are a bit different, and saving six months worth of income might be necessary.

“You can build up the buffer by reducing your spending to essential items and services, withdrawing superannuation early, or finding a second source of income,” Baker said.

“If you are made redundant, the redundancy package can make a sizable contribution to this buffer, as can your FY20 tax return.”

Consolidate your debts

According to Baker, it’s best to pay down your debt as quickly as possible while you’re still bringing in a steady income each month – that is if it’s a financially reasonable move for you.

“If you can, consolidate your credit card debt and personal loan into your mortgage by refinancing your mortgage,” Baker explained. “Mortgages normally have the lowest interest rates across all loan types.”

Negotiate interest rates, or move your debts to lower-rate products

Besides consolidating your credit card debt into your home loan, Baker said there’s also the option of transferring your card debt balance to a new zero-interest balance transfer credit card.

However, she warned you would have to be careful of the interest-free term, which normally lasts six months before your interest returns to its full rate.

“With regards to home loans, for the first time, rates have fallen to below two per cent. Now might be a good time to refinance and save on interest payments,” Baker said.

Generate a second income stream

Alternatively, the adviser explained you could sell unused items that you’ve been meaning to offload but haven’t gotten around to. Platforms such as Gumtree, eBay or Facebook Marketplace are good options to sell your things.

Consider a reduction in hours over a redundancy package

If your employer’s started discussions on reducing working hours and layoffs and offers you a choice, it might work out better for you if you have your hours reduced.

“The former option could see you become eligible for JobKeeper payments and you may have a job to go back to after the ‘stand-down’ period,” Baker explained.

“You could also use the extra time to generate a second income or look for a new role. If you take the redundancy offer, you will be looking for a new job in a tough market while jobless.”

Consider looking for work while you’re still employed

There’s always strong indicators when the fear of losing your job may soon become reality. Before that happens, it might be a good idea to start applying for new jobs now – particularly in industries that are booming.

“Employers often look upon employed applicants more favourably,” Baker said.

“Search for roles outside of job portals and consider networking online through LinkedIn and joining online business events and groups to find suitable positions.”

Given the bleak state of the job market across many industries, landing a new role might take a couple of months or more. Starting your job hunt early will reduce your chances of being unemployed for a long period while you’re in between jobs.

Get a realistic picture of your spending vs income

Don’t be lax about your financial planning. Use a budget spreadsheet or a budget app to review all your expenses so you have a snapshot view of how much money is coming in and how much of it is going out.

“Following this, create a spending plan and separate it into your three budget areas: ‘your absolute basics’, ‘nice to haves’, and ‘living the dream’ – the latter representing your goal once you’re back on your feet,” Baker said.

“Analyse what the bare minimum is that you can live off, then put the rest away into your savings.”

Use your annual leave – slowly

You might want to consider using your annual leave or long service leave (if applicable) as you risk losing some of it in the off-chance your employer goes into insolvency.

Baker advised it might be best to avoid taking a long stretch of leave and opt instead for taking off one day a week or fortnight. By remaining in the workplace and showing your value, it might help you retain your role if the company does need to make some job cuts.

Regardless of which route you take, the one thing to always have is a rainy day fund to fall back on.


Disclaimer: This article contains general information only and is not intended to be used as personal advice.

 

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