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How to redundancy-proof your finances

2020 has shaken up Kiwis’ everyday lives in many ways, including job security. If you’re feeling that your job may be at risk of redundancy (or simply like to be prepared for it ‘just in case’), there are things you can do now to make your finances stronger.

Here are some practical examples from our SHARE financial advisers.

Take a good look at your budget

One of the first steps to take (if not the first overall) is to look at where your money is coming from and going, and draw a clear line between ‘needs’ and ‘wants’.

The goal is to understand exactly how much you need to spend each month on the basics (like food, bills, mortgage repayments, insurance premiums, petrol etc.), and how much falls under ‘discretionary spending’ (like holidays, monthly subscriptions, eating out or other non-essential items).

So, what does your discretionary spending look like? Knowing this ball-park figure should give you an idea of how much you could potentially divert to your emergency fund…

Build your rainy-day fund

Of course, we’re not suggesting stopping your discretionary spending altogether, right off the bat – after all, life is made to be enjoyed! But you may be able to save a portion of it in a rainy-day fund, on a regular basis.

Now, how big should your rainy-day fund be? Well, there’s no one-size-fits-all approach here. Generally speaking, the higher your monthly expenses (and the more people are relying on your income), the larger your emergency fund needs to be.

It’s a good idea to start with at least three months’ worth of income saved, and then build up from there. Depending on your job, it may take longer to find work, so a six-month buffer might be preferrable.

Debt slowing you down?

Once you’ve created an appropriate rainy-day fund, make tackling debt your next priority, starting with high-interest debt like credit cards.

Used properly, credit cards can be a helpful tool, but if you’re only paying the minimum payment instead of the full balance owing each month, it can be easy to drag your debt around (and pay a lot more interest than you should). Paying down high-interest debt is one of the key ways to build resilience in your financial life and prepare to weather life’s next storm – including sudden loss of income.

Find other sources of income

When trying to save money, every little bit counts. According to media reports, more and more Kiwis are taking the leap to self-employment this year, while others are cautiously exploring their options by launching their own side hustle.

This could be anything from coaching through to art, photography sessions, or whatever else you’re good at. Have a look at online platforms that support local businesses and creative side-hustlers, like the new Chooice.co.nz and Felt.co.nz; they could be a handy source of inspiration.

Spring clean and host a garage sale

It’s amazing how much we accumulate in our homes over time, so every now and then, it’s nice to spring clean every room and get rid of what we no longer need. This doesn’t mean you should throw away all your clutter – how about hosting a garage sale?

If you’re into DIY, you’ll know that some things can be ‘upcycled’, made into other objects and sold. Others can be donated or recycled. Either way, you may be able to make some extra cash, while also freeing up precious space.

Learn more about Government assistance and your rights

Of course, we hope that redundancy does not come to you. But even though it may never happen, there’s nothing wrong in knowing what’s available out there in terms of government support: You can find up-to-date information on Covid19.govt.nz and Business.govt.nz.

As for your rights, read through your employment agreement to check what your entitlements would be in case of redundancy. Plus, keep in mind that redundancy could impact your income tax, KiwiSaver, student loan and child support payments: click here to learn more.

Update your CV

When was the last time you updated your resume? Take a moment to give it a makeover. Again, redundancy may or may not be on the cards, but by refreshing your CV, you’ll be ready for any contingencies that may arise – including an unexpected career opportunity.

We’re here to help

The uncertainty that comes with job loss or redundancy is a challenge, but it may also open up new opportunities. And by putting yourself in a solid financial position now, you are more likely to respond faster when that happens.

Have any questions for us? Please don’t hesitate to contact our team at SHARE. Our advisers are here to help.   Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current development or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.