How To Keep On Top of Your Finances During Unemployment
If you’ve been made redundant, it’s understandable that your main focus at the moment is on getting another job. But while you’re brushing up your CV, filling in applications and scrolling through the latest listings on CharityJob, it’s important to put some time aside to think about your finances.
A survey of StepChange Debt Charity’s clients in 2019 revealed that reduced income, unemployment and redundancy are the most common reasons for seeking help with debt problems. And with the impact of Covid-19 leaving us all a bit uncertain about our financial and professional futures, it’s no wonder the fear of debt has been persistently on our minds.
Worried about how the current economic downturn will affect your financial prospects? Here are StepChange’s top tips on managing your finances during a period of unemployment or redundancy.
First, understand what you can and can’t afford to pay
Making a budget is very important. List your income and debts, and gather details of your spending and other outgoings to create a monthly budget. This will help you get a clearer picture of how much money to need to allow for essential household spending each month.
Using a budgeting template (such as the one on the Money Advice Service website) makes this easier.
Many people find this daunting, but it’s an important first step. Make sure you’ve got all the information you need by:
- Checking through letters from lenders, bank statements and records of other accounts you have, such as your mobile phone.
- Making sure there aren’t any debts you’re not aware of by checking your credit file with three main credit reference agencies: Experian, TransUnion and Equifax.
- Including amounts for things that you pay for less regularly, such as Christmas, car repairs or vets bills. To do this you need to divide the yearly cost by 12 to give you a monthly figure.
- Writing down everything you bought during the previous month.
Pay your most important bills first
When you don’t have a regular wage coming in, it’s important to keep on top of your ‘priority bills’. These are the ones you should pay first because the consequences of not paying them are more serious than for other payments. The advice is always: ‘Protect your home and avoid being cut off’.
If you fall behind with your rent or mortgage you’re at risk of eviction or repossession. Failing to pay energy bills could lead to you being cut off. That’s why these bills are the most important ones to keep on top of when money is short.
There’s more information about priority bills on the StepChange website.
Don’t be afraid of getting in touch with creditors and asking for help
People are often scared to admit they might struggle to pay what they owe, but if you tell your creditors, many will give you some breathing space while you deal with your money problems. They may freeze interest and charges, apply other temporary measures or agree to a payment holiday.
Most creditors are willing to be flexible and will look at options to try to prevent their customers from falling into further financial difficulty. It’s important that you get in touch with them sooner rather than later.
Work out if there are any ways you can save money
As the saying goes ‘If you look after the pennies, the pounds will look after themselves’. While that’s not guaranteed, it is a good start. You can:
- Use price comparison sites to find cheaper energy suppliers to switch to
- Ask your phone provider to review your contract
- Check you’re getting all the benefits you’re entitled to
Don’t worry about money, get help
If any of this sounds like a struggle and if you’re already worried about falling behind with important payments, don’t wait to get help. A free debt charity will look at your budget and provide you with advice tailored to your circumstances.
Common questions about money problems following redundancy
Should I use my redundancy pay to pay off debts?
You could consider using your redundancy pay to pay off your debts, but you should weigh this up alongside the other options available to you. Do think about how doing this could impact your financial situation. For example, have you considered how long it will take to find new employment or how you will pay for your essential household expenses in the meantime?
If you owe money on a bank account, for example, an overdraft, you could open a new, separate bank account for your payment. Otherwise, the bank could take it to repay any money you owe them.
Should I take out more credit to get by?
A credit card or overdraft might seem like a good idea, but it’s only a short-term solution.
Taking out more credit when you have less money coming in can make your financial situation worse, as you’re at risk of not being able to afford all the repayments.
If I’m on a debt solution how will my redundancy affect it?
You need to get in touch with your debt solution provider and ask them to review your situation. They will give you advice based on your circumstances. This may be a recommendation to change to a more suitable solution, or adjusting payments made through a debt management plan.
If you’re worried about how you’re going to cope financially while you’re out of work, don’t wait to get help. Make sure you get advice from a free and trusted source – there’s no need to pay for debt advice. Go to Stepchange.org, National Debtline or the Citizens Advice Bureau for help by phone or online. If you’ve been made redundant because of the coronavirus pandemic, the new Covid Payment Plan (CVPP) launched by StepChange may be a way to get your finances back on track. This is a short-term helping hand, offering you a simple alternative to full debt advice.
Jenny Simpson works in the marketing team at StepChange, the UK’s leading debt charity. They help more 635,000 people a year deal with debt and money problems with free, expert advice. StepChange Debt Charity is authorised and regulated by the Financial Conduct Authority.