At my place of employment yesterday, an email was sent round to everyone. It was from the head-honcho, the big cheese, the chief, warning everyone that we face a £35 million shortfall over the next 5 years and  spending, recruitment and employment would need to be cut as a result. Obviously non-pay budgets would be the first under review but “all options” remain open in terms of balancing the books.

It was a shock, but perhaps, not entirely unexpected. The entire world is feeling the pinch right now and the UK perhaps more than most given we’re the 4th 3rd most indebted country on the entire planet. Now, it’s extremely early days, and on the face of it I am in one of the more safer areas of our business. But that doesn’t mean I am taking my employment for granted and it doesn’t mean I am not at risk.

I have been given up to 5 years to plan for the worst. So what am I doing with that information?

I am doubling my efforts to repay my debts by the new year. If I (or you) are made redundant, then having debt hanging around will make life twice as hard. With no income, how will monthly commitments be met? Credit cards, store cards, loans, car payments and all other kinds of unsecured lending create a need to earn a minimum amount to meet these obligations month in, month out, before you even look at ‘living’. Reducing these to nil removes that worry entirely. Instead of needing to take home ‘at least’ £1,500 to live and meet your creditors demands, you could potentially look to take home just £500 by part-time means. This keeps your future employment window open far, far wider.

Take all the overtime that comes. Right now where I work overtime is everywhere you look. Courtesy of my debt freedom goal, I have been working overtime fairly regularly anyway and had planned to do so until December (my planned debt-freedom month). But now I will take every morsel that comes, and continue to take every morsel that comes until either the threat of redundancy goes away (perhaps in as much as 5 years time), or I am made redundant. Whichever occurs, I will be much better off financially for it. Realistically it’ll take a physical and emotional toll on me, but to know it means an enhanced degree of financial freedom makes that worthwhile.

Create and maintain an emergency fund. Various financial blogs extol the virtues of having a fund you can reach quickly, with a reasonable sum contained within it. For me, my emergency fund might look to be just £1,000 initially as right now, I don’t have one at all. Every piece of money I have is earmarked for a purpose. If my car blows up tomorrow, I need to have the ability to fix or replace it without opening a new debt. Emergency funds should not be tied up in ‘term’ accounts, it should be available immediately so don’t think of it as an investment product but more of a safety net. Don’t rely on your credit cards for your emergency fund either: If your emergency is redundancy, how do you propose to repay those cards after you use them? When able, an emergency fund should contain 6-10 months of what you’d need to sustain your household if money suddenly stopped coming in.

Put together a SCRAM file. In nuclear power stations, a SCRAM button is used to prevent a nuclear meltdown in the event that normal control of the reactor is lost. It pushes the control rods deep into the reactor, effectively stopping the reactor from working. The power station shuts down, and everyone lives to go home to their families. We all have a lot of things that come out of our bank accounts on a regular basis; Magazine subscriptions, mobile telephone contracts, entertainment packages (LoveFilm/Netflix for example) and other unnecessary expenditure. If you suddenly lose your job, you need to hit your own SCRAM button to stop these in their tracks or as quickly as possible. Put together a document that details what comes out, when, for how much, and who you need to contact or what you need to do to stop them. This one sheet of paper can very quickly cut your monthly outgoings to the absolute bear minimum with the option of picking them up again when your financial position improves.

Keep smiling. While it isn’t a pleasant prospect to have uncertain employment ahead of me for a while, I am in a better position that vast swathes of my colleagues. I do not have a mortgage (yet. One day.). My outgoings are cut back to their reasonable minimums already courtesy of my debt freedom goal. I will not have debt in a few months time and I am young enough but experienced enough to either be kept on, or hopefully find gainful employment not too long after disaster if it strikes.

The important thing is to plan. Without a plan, when your own recession bites, the entire situation will seem insurmountable when it doesn’t have to be that way.

Where to find extra help - the government as part of their eGovernment service provides a “Real Help Now” service packed with advice on the benefits and entitlements for those made redundant and the first steps you need to take. You can get started by clicking here.

How are you keeping your financial head? Share your plan in the comments.

If you haven’t started hedging yet, now really is the time to start. Even if you only manage to hedge one tank-full, you’ll be relatively better off than if you don’t. Here’s why:

From next Tuesday (September 1st) the government’s 2p/litre rise in fuel duty announced in the last budget comes into force. Analysts are saying fuel prices will rise far beyond that initial rise due to the renewed increases in the price of oil, partly thanks to world economies picking up again as the recession eases worldwide.

Get Hedging – If you haven’t read my ‘Part 1′ on doing it, now is the time to do so.

Give Some Love – Your vehicle is a complex piece of machinery that works at its best when well cared for. Clean out or change that air filter, give it an oil change, or drop it in a little early for that annual service. A well-serviced vehicle can improve your MPG by up to 15%.

Clear the Crap – Is your vehicle used like a secondary storage cupboard? Do you have a boot filled with ‘stuff’? Every time you accelerate your car down the road, you’re using fuel unnecessarily by having to accelerate that ‘stuff’ as well as you and the vehicle itself. Take 5 minutes today and assess what is in your car. Do you need it? If the answer is no, take it out.

Inflation is Good – When it comes to your tyres, anyway. Dig out the owners manual for your vehicle and find out what tyre pressures you should have, then check them. If you don’t have any method of doing this at home, next time you’re passing a Shell petrol station, dive in. They offer free Water & Air at every garage. If you do a lot of high milage high speed driving, consider pumping 1 PSI above the recommended level for a little bit more of an efficiency edge. Check them monthly to keep your edge.

Kill Your Speed – Speeding might hurt your pocket in obvious ways, i.e. 3 points on your license and a £60 fine in your wallet. But it hurts in less obvious ways as well. If you get caught, you lose time. An average traffic stop consumes around 30 minutes. Your insurance premium may well go up if you get points on your license, which will keep costing you for up to 4 years. But going faster also consumes more fuel as well; Slowing down and keeping to the limit will keep the police off your tail, and more miles traveled between tanks.

Drive Smoothly – Harsh acceleration drinks fuel. Harsh braking eats brakes. Cut your maintenance costs and fueling costs by anticipating further ahead than you might be accustomed to by training yourself to look to the horizon. Anticipating events that appear to be brewing ahead (traffic lights, queues, junctions etc) and laying off the accelerator 20 seconds earlier will reduce your speed, and cut the amount of petrol you burn. As an added benefit, your passengers will enjoy being in the car with you as they no longer feel like they’re in an Exocet missile.

Idle Waste – It happens, and yes it is annoying, but it doesn’t have to cost your wallet as well as your timepiece. The gates come down at the level crossing just as you approach. Kill your engine: chances are you’re going to be there for at least 5 minutes. In a modern engine, 1 minute of idling is the same as driving 1km. Save yourself 5km’s of road driving, and switch off while you wait. You’ll also help cut emissions and noise pollution at the same time.

Find Cheap Fuel – A little forward planning goes a long way. Don’t wait until your car is complaining you’ve got less than 2 minutes to find it some fuel or it’ll dump you on the side of the motorway. While I advocate only buying half a tank at a time (remember – extra weight costs money to shift, and fuel is heavy!), I recommend doing your homework first before pulling in to any random garage. Today, the prices range from 110.9 in my area, to 100.9 for a litre of diesel! That’s a whole 10p per litre difference. If you’re buying 50 litres, that’s a whopping £5 difference! Sign up at PetrolPrices.com and you can see what stations near you are charging right now. A few minutes work here will save you potentially hundreds of pounds over the course of a year with minimal effort.

Quite often I’ll sit here for 20 minutes or so having hashed out a post, changing the order of things, changing words and generally trying to make it flow on paper how it sounded in my head. I was reviewing the wording on my post about my method of fuel hedging just now, when a family member walked in.

They saw the title of the post and looked at me wide-eyed, a hint of genuine fear in their voice, as I explained the general premise behind it in a few sentences. “I hope you’re not risking your money”, they said, despite the fact the only financial product I’d mentioned was “high interest savings account”.  They saw hedging and the fact I was not using my “every day” bank to do this, and immediately decided I was gambling with my life savings and stood to lose thousands.

To an extent I understand. I’m no financial genius, but their concern comes not from my history, but theirs. They got burned in 2006 and lost over £1,500 by using a financial investment product they didn’t understand – which incidentally was recommended by their Independent Financial Advisor – and assumed it was safe on that basis. While I’m sure it was explained that they were ‘investing’ rather than ‘saving’, it likely didn’t register. The difference between the two terms to lay-persons is minimal? Perhaps even none?

Since this event, they have an inherent distrust of anything financial that might make or save them money in real terms. Their life savings sit in a savings account that they’ve had for decades, with a bank they’ve been with for decades, that pays them a measly 0.75% APR. I’ve suggested time and time again that they move it to somewhere that pays 5%, convert it to 3 year bonds, or a combination of both, but they view it as “too risky”. In their mind, moving again could cost them dearly, despite the fact not moving is costing them dearly.