I had originally intended to write just one article about 20 things to do before and after you lose your job, but it turned out to be nearly 3,000 words which is just way too long for one post. So here is part 2, or “10 things to do after you lose your job.

 

1. Don’t Panic!

First of all there had probably been some indication things were not all well, and you had a moment to implement my 10 things to do before you lose your job. But even if you didn’t and your job loss has come out of the blue, there are still lots of things you can do.

The first one is don’t panic! You may have just been given your P45 and escorted off the premises and your brain is working at 1,000mph trying to calculate the impact, but it is important not to try and do anything about your situation while in this emotional state.

Go home, put the kettle on, brew a sweet cup of tea, and chill. You’ve lost your job, not your life!

 

2. Assess Your Emergency Fund

Hopefully you have some savings that can cover your immediate needs. These may be in a designated emergency fund that you set up to cover life emergencies such as this. But right now any liquid assets you have access to will need to be re-designated as your emergency fund.

If you have no emergency funds available but have been saving for a holiday, or a new car, or some home renovations – these no longer matter. If your income has been cut to zero or near zero then anything you have access to may need to help sustain you until you can find a new job.

Pre-recession you could probably guarantee you’d find a job in a few weeks. In these harder financial times being unemployed or underemployed for 3-9 months is not unheard of, so take stock of what you have access to.

If you’re panicking that you have absolutely nothing but a mountain of debt to service, remember; don’t panic! I will cover all in this article. Just try to relax, and keep reading.

 

3. Enjoy Some Downtime

You need to come to terms with your situation, and not make rash decisions. It will highly depend on your overall financial situation as to how you do this and how long for, but the bottom line is you need to deflate your anxiety and emotions before starting to move on.

If you have healthy emergency cash reserves, money in your holiday account and no pressing bills – you could even consider a short break away. If you’ve been wanting to take a holiday but pressures of work have not allowed it – what better way to ‘celebrate’ than jetting off to soak up some sun for a week or two?

If things are a little more bleak it is still important to take a day or two just to calm yourself. Read a book, watch some DVD’s, or finish some DIY. Anything you find both distracting and relaxing will suffice.

 

4. Check Redundancy and Final Pay

If you have been made redundant rather than simply fired, check if you are entitled to redundancy pay and how much, and make sure you get it.

If you have been employed continuously for more than 2 years by the same employer, in the main you are due at a minimum statutory redundancy pay.

Statutory redundancy pay is set at £430 a week for each year you have been employed for people aged 22 to 41, and lower for younger and more for older. You can calculate your exact statutory payment at the Direct.gov website. Your employer can override this with a more generous package though, so have a read through your contract or statement of particulars and see what you are entitled to.

The important thing is, if you are due it, make sure you get it. Additionally if you have worked beyond your last pay date, you should be due a final pay-check of some description. Depending on your employer, you might need to ‘remind’ them.

 

5. Debts, PPI & MPPI

If you have outstanding balances on loans, mortgages and credit cards, you might be panicking about how you’re going to service them.

First of all, go back to step 1. Don’t panic!

Do you have active payment protection insurance? Some mortgage lenders even make this a requirement, so read through your paperwork to double-check. If you’re at all unsure, speak with your lenders without disclosing the reason for your enquiry at this stage.

These insurance policies will pay your minimum payments for around 12 months on credit cards and loans. While this won’t assist in reducing their balance on your cards if you’re in a pickle, it will at least keep the debts serviced. Remember not to spend on your cards though, as you will just have a bigger hole to dig yourself out of when re-employed.

Mortgage Payment Protection Insurance will make your mortgage payment whilst unemployed for a minimum of 6 months, but 12 is more usual.

Do you have an income protection policy you have forgotten about? These are offered by a multitude of financial service and insurance providers and are easily forgotten about if taken out a while back.

If you are covered by any policies – activate them now. It will help your emergency fund last longer.

If you have no protection insurance anywhere, then your next actions depend on your discoveries about your emergency funding situation. If your fund permits you the ability to continue servicing your payment needs for a period, then continue to do so. Do not start electing to pay only certain creditors as this will heavily impact your credit score, possibly making it harder to get another job.

If you have no emergency funds, nothing to sell, no insurance policies and no friends or family to help, you need to talk to your lenders. The earlier you speak with them and explain your situation the better it will be for you.

If you leave it until the bailiff is trying your windows; it is too late to make much headway in negotiations.

 

6. SCRAM Plan

If you’ve been reading Five Pence Piece for a little while, you may have set up a ‘SCRAM Plan‘.

This is a plan designed to be put into action when your finances go nuclear – e.g. a job loss. If you’ve made one, dust it off and implement it. It will contain all the contact numbers and account details needed to cancel all your non-essential services such as magazine subscriptions, rolling phone contracts and so on saving you a small fortune in payments each month.

 

7. Claim JobSeekers Allowance

If you’ve lost your job or been made redundant, register as quickly as possible with the Job Centre to ensure your National Insurance contributions are kept up, and to claim Jobseeker’s Allowance. If you are over 25, this entitles you to £71 a week and while it won’t make you rich, it can at least help keep you fed at a minimum.

Providing you’re paid up, this will provide 6 months of Contributions-Based JSA. CB-JSA does not count your savings, and will be provided whether you have 6p in the bank or £6 million. After 6 months you will switch to Income-Based JSA that drops the benefit on a sliding scale depending on your savings and other income streams.

See Direct.gov for further information.

 

8. Housing Benefit

If you are a private tenant you may be entitled to housing benefit. This will pay a proportion (up to all) of your rent, and can make a huge difference to your finances. Your entitlement will depend on where you live, who you live with, and the type of accommodation, as well as your savings.

For me, they would pay my entire share of my rent making redundancy a lot less painful and help stretch my emergency fund from 6 months to almost 2 years with careful planning.

Again, more information for your circumstances available at Direct.gov.

 

9. Council Tax & Other Benefits

Check to see if you are entitled to a reduction in your council tax, or to receive council tax benefit. Like housing allowance it will depend on your local council, so make some enquiries and see if you are entitled to assistance.

Likewise your utility providers may have special ‘social’ tariffs that reduce the cost of your line rental, gas and electricity. Review your budget and ring around and see what they can do for you. If you don’t ask, you don’t get!

The Turn2Us website has a benefit calculator to check your entitlements.

 

10. Network , Network, Network!

Now that we have hopefully secured your immediate needs, it’s time to network with former colleagues, friends, family and your social networks. See if any of them have employment opportunities that fit your skill-set, or may be able to put in good words for you in places they know of.

Update your LinkedIn profile. Begin your job search in earnest.

Good luck!

No matter where you are right now with your financial goals, there is an ever-present need to have reasonably liquid cash to hand to cover life’s emergencies. There are varying different views on how much should be in one (6 different sites, 6 different theories) but they are all agreed on one point: You must have an Emergency Fund.

What is an Emergency Fund

In its simplest form, an Emergency Fund is a cake tin under the bed you stash money in for those unexpected (and/or unwelcome) events in life. An important distinction between a general ‘slush fund’ or overdraft is your emergency fund will cover you for The Big Things. Maybe you get made redundant; maybe you are struck down with an illness for 9 months but your sickness cover from work only covers you for 6 months at full pay; maybe you must have a vehicle for your work, and yours blows up.

There are thousands of different events some of us would consider a personal emergency that others would not. My car recently gave up the ghost but it was not an emergency for me. I live in a metropolitan city with a superb public transport network. I live and work in the same city. If I lived in Cornwall 19 miles from my nearest railway station and worked and commuted every day to Devon however, it would be an emergency.

Why You Need An Emergency Fund

It’s a backup plan. It’s insurance you pay a premium to yourself for. It’s a cushion against the inevitable times in life that you’re in the middle of Yin and life decides you should have Yang’ed instead. It’s above all else, security for you and your family to know that if something goes wrong, you’ve probably either totally got it covered, or are a good way to having it covered.

Why Not Just Use Credit Cards

Some advocate using available lines of credit as your emergency fund instead, be that credit cards, HELOC’s, or some other credit instrument. This is a Very Bad Idea, in certain circumstances. I understand the thinking behind it, of course. Not every emergency is going to be one that involves your inability to continue earning an income, or continue earning an income at the same level as before whatever your emergency may be.

By definition an emergency is serious, unexpected and perhaps even dangerous. You cannot predict or rely on the fact when an emergency strikes you or your family (it is when, not if) that it will be of a sort you can use credit for instead of liquid cash.

What if you lose your job? Get fired? Get made redundant? <insert any other kind of financially cataclysmic event here>? Then what? You are left with no immediately available cash to work with beyond what is in your current account from your last wage packet (if anything). You begin using your credit cards to live on, but your job search takes 4 months to find something that pays well and is something you enjoy.

Consider this: Could you continue to make the necessary payments on those cards, as well as your rent/mortgage, utilities, council tax and every other payment that comes out of your account each month? Even if you do manage to make the minimum payments and put everything on your cards, what’s the pay-off plan? Your outgoings are £950 a month, your new job pays £1,000 and you’ve just popped £3,800 on your credit card over the past 4 months.

Bad news. Your minimum payment is £76, and you don’t have £76 spare. Even if you do free up the extra needed, the bad news won’t end there. Paying that minimum would take you over 35 years to pay back £3,800 (at a representative 15%) and cost you £5,800 in interest alone.

Where to Keep Your Emergency Fund

You can avoid all the bad points above, by making your own Emergency Fund. During the example emergency above we needed £3,800. By planning ahead and saving that amount in a high interest, easy access savings account we didn’t even really notice our emergency.

Why? Because planning for it made it an annoyance to our life, and not a catastrophic event. We transferred what we needed each month to our current account, and life carried on. A new job arose, and off we went. That spare £50 went back into slowly rebuilding our fund back up for whenever it may next be needed.

Having an Emergency Fund turned a 4 month jobless period into a mere annoyance and not into 35 years of credit card servitude and bad credit history from potentially failing to meet minimum payments.

How Much To Keep in Your Emergency Fund

As I pointed out at the beginning of this post, everyone who has ever written about Emergency Funds has a (differing) opinion on how much is enough. Some say you should save 6 months salary. Some up that to a year. Yet others reckon at least a month’s living expenses should be kept by, just in case.

In the current economic climate I advocate that everyone should keep 6 months of living expenses by in your Emergency Fund. Not only do I advocate it, that’s precisely what I have done.

Why living expenses versus actual pay? You may get paid £5,000 a month, but if your fixed outgoings are only £1,500, why scrimp and save the extra when it won’t necessarily provide you a tangible benefit. Your emergency fund should cover your fixed, important costs whilst – for example – out of work. It is not designed to cover lifestyle wants such as your daily visit to Starbucks.

How To Start An Emergency Fund

If you’ve never really thought about saving before, or if you have savings but dip in and out as needed, or have no savings whatsoever, the thought of starting and saving up 6 months of living expenses that you may never need can seem ridiculous, unnecessary, and a waste of your ability to live life. I’ve heard lots of arguments against starting an emergency fund. Most people’s opinions change when they experience that emergency in life where an emergency fund would have turned an emergency into an annoyance.

By then, it is just simply too late and they’ve already landed themselves in 35 years of credit card debt as a result.

Start Small, But Do Start

Unless you do have a great amount of disposable income, you’re not going to have lots of cash to throw into a savings account right away. So start with a small amount of say, 2.5% of your take-home pay. That’s £25 if you take-home £1,000. It might seem a pointless amount but even ignoring compound interest that’s £300 in the first year of trying if you do nothing else.

Be Realistic

If you try and save more than is comfortable, you won’t keep it up. Start with my 2.5% above and see how you get on. Do it the moment you get paid, and learn to live without it. After a few months you won’t even notice it any more.

Be Regular

Set it up to happen automatically by standing order. If you set and forget, it will keep on going. If you have to do it each month, you’ll find reason after reason just not to do it.

Increase as able

The Telegraph newspaper website has a section dedicated to money saving tips as well as the Frugal Friday series on this very website and countless others.  After reading around you manage to free up another £50 a month that you didn’t have before and don’t necessarily need. Why not increase your £25 standing order to £70 and leave £5 as a treat to yourself each month. Assuming it took you a month to make all the necessary changes after the first 12 months you now have £795 in your Emergency Fund and that may already be one month’s living expenses for you.

If you live with a partner, pool your finances and make a concerted effort to build it up together as quickly as you can.

Bonus Bonuses

If you are commission based or get a bonus from work then consider using that as a massive jump-start to your Emergency Fund. Particularly unexpected bonuses, as you didn’t count on getting it, so you won’t notice if it isn’t spent.

Only touch it in emergencies

It might seem obvious, but only touch your emergency fund in emergencies!

It can be nice to feel you have cash for a rainy day, but it will only be useful to you if you are honest with yourself and only touch it when you have a real emergency on your hands. An emergency is not defined (despite how some people act!) as needing The New iPad, or a similar want.

Photo credit 401kcalculator.org

I’m still feeling under the weather, courtesy of my vaccination on Friday. I very rarely get ill, so I always feel as though I’ve been hit by a truck when it happens! Runny nose, aching muscles and joints, thick head and a general lack of drive to do anything. In short, not fun.

But, one advantage is I have not done all that much the last couple of days. I have spent most of today in fact thinking about what I am going to do when I am finally debt free in the next month or so.

A few years ago I would have splurged on all kinds of ‘toys’, new gadgets, a big expensive holiday and so forth. The last 10 months has disconnected me almost entirely from the consumerism that got me here in the first place.

So what will I do when I am debt free?

I will treat myself to Burger King

As silly as this sounds, I have not eaten out for myself at all this year. I have been frugal in my food shopping, dining and cooking experiences, and just once I would like to say “to hell with it” and go have some fun in a culinary sense. I can be fairly certain to walk away pretty full and not spend more than £10 for the privilege.

It’s hardly haute cuisine, but it has been something I have been dreaming about for the best part of a year and it will be a major expense for me: Ordinarily £10 will feed me for a week!

I will pad out my Emergency Fund

I have never had one, and I know I need one. Especially now that the Grim Reaper has been trying the doors at work. I think a reasonable starting point would be £1,000 – and work upwards towards 12 months of expenses from there. Currently my emergency fund is £70, and that is a bit of a cruel joke in every sense.

I will take my parents out to dinner

My mum and step-dad have been my rock so many times over the years, but they saved me this year. They put me up – at great inconvenience to themselves – rent free, to help me get out of the dark place that a falling-apart marriage creates. Living rent-free has enabled my “Get Out of Debt In A Year” goal to be a real possibility and not some pipe-dream. Thank you, guys.

It won’t be cheap. While my step-dad will eat just about anything (with the exception of carrots), Mum is allergic to a lot of foods. I need to do some research to find a good setting that can cater for this.

I will open my 2009/2010 Cash ISA

I’ve been singing the praises of ISA‘s on this blog quite a lot. When I am out of debt, it’ll be time to heed my own advice and go and get one!

I will take a short frugal holiday

I need a holiday. I totted up that I have worked an entire extra month in just 9 months so far at work in my ‘debt payoff’ journey, and it has left me feeling old. A short holiday will be nice, just 4 or 5 days will be fine. Somewhere relaxing, somewhere I can just sit back and unwind. Somewhere I can soak up a bit of culture and a bit of alcohol. I will pay in cash, of course!

Should I expand this list somehow? Have I missed a blindingly obvious “when debt free” todo?