Guide to Handling Redundancy

Experiencing redundancy can feel overwhelming, but with the right approach, you can navigate through this period of uncertainty. Below is a basic guide to help manage your finances.

1.      Get professional advice: Don't hesitate to seek guidance from a Financial Adviser. They can provide personalised advice to help you through this. If your employer uses an EAP provider, then this could help with some of the costs of getting financial advice. At DUX, we contract to two EAP providers (EAP Services & EAP Raise).

2.      Your current / future savings: Add up the balances of your current savings, your redundancy payout (if applicable), leave to be paid out and work out what the total amount will be (i.e. your bag of money). If your redundancy is not kicking in for a period of time (i.e. you are still working until this point), then try and aggressively save up until your last day (every dollar counts). Once you calculate how much you have, this will be used to replace your income while you find your next employment. In this example let’s say, your total bag of money ends up being $15,000 (savings, redundancy payout, etc).

3.      Run budget(s):

Version 1 Budget - Work out how much you spend on a weekly, fortnightly or monthly basis (however you normally get paid) – without changing your lifestyle. For example, you work out it costs you $5000 a month to live.

Version 2 Budget – This is the scaling back the extra fun, but still enjoying life a little bit budget. Run a second budget if things get worse and start trimming unnecessary items, like Netflix, etc.

Version 3 Budget – This is the bread and water budget. Run a third & final version of your budget if things take a bad turn. Scale back aggressively on your expenses, cut everything you can cut back on, while still managing to live.

4.      How long your money lasts: Once you do steps 2/3, we can calculate how long your savings might last when you lose your income. Taking the example above, $15,000 savings / $5000 expenses per month = 3 months until you run out of money. The more you reduce your expenditure, the longer your savings will last. For example, if you can live on the bread and water budget and spend $3000 per month, then you have added two more months to how long your money lasts ($15,000 / $3000 = 5 months).

What this all means: The reason we have done steps 2, 3 & 4 is to understand how aggressively you have to go out and find a job. It might also help you realise that you do not need to panic. For instance, if you have 6 months before your money runs out, then you have some breathing space and don't need to take the first job you find, at the Supermarket for example. However, if you only have 2 months, you might need to take any available job, even if it's not ideal.    

What if the above hasn’t worked, and you’re running low on money? – see the next steps below

5.      Next steps:

Mortgage Repayment Suspension / Talk to your Landlord - If you have a mortgage and you are struggling with repayments, consider reverting your loan to Interest Only, or reducing your repayments to the minimum (if you can). This can help with managing your repayments. If you haven’t found work and your money is getting low, you can consider a Mortgage Repayment Suspension, where your mortgage repayments will stop, but your previous interest repayments will be capitalised to your loan. You will need to speak to your adviser/bank to apply for this, and it’s best to talk about the implications too.

You want to apply for this before you run out of money, because mortgage repayments may only account for a portion of your monthly spending. As per the example above, the person has budgeted down to $3000 per month and this lasts them 5 months. Let’s say the mortgage repayment portion of this is $1000 of that monthly cost. If you were on a mortgage repayment suspension for 3 months, then that’s adding $3000 back into your budget, which can fund another month for you.  

If you are renting, then have a discussion about temporarily stopping your rent payments. Each landlord is different, but having a discussion can help.

KiwiSaver – If you are on the bread and water budget then you might want to consider going on a KiwiSaver Savings Suspension to help with cashflow. This is where you stop KiwiSaver contributions in the short-term. Bear in mind that this will also stop your employer contributions too. If you’ve run out of money in Steps 2-4 and in Step 5 the Mortgage Repayment Suspension period is up, then apply for a KiwiSaver Significant Financial Hardship, where you can apply to withdraw some funds from your KiwiSaver while you look for work. Your adviser can help with this, or you will need to talk to your KiwiSaver provider & apply directly.

Insurances: If you have redundancy insurance in place, then it may be worth digging this up now and applying through your provider.

Update Your CV: Make sure your CV is up to date and it showcases your skills and experience. As mentioned, you may need to start job hunting asap. Note, it can get very competitive with finding a new job as more people lose their jobs in your industry, so getting onto this early is the key. If your employer uses EAP, then they have an employment professional who can assist you with this. Or it could be worth spending a bit of money on someone that can help with updating or putting your CV together, if you can’t get assistance through your employer.  

Feel free to share this with someone you know that might be experiencing uncertainty with their job, as we are always happy to help.

Want to book an appointment - contact us