Losing your job can be one of the most challenging experiences you face. It’s not just the emotional impact, it’s the financial implications too. Especially if you have existing debts which need to be paid.
This guide will include suggestions on how to cope with redundancy and tips on how to manage debt after job loss.
How to Cope with Redundancy
Redundancy can be overwhelming but it’s important to try to keep a clear head. Taking the right steps can help you manage both the practical and emotional challenges that you may face.
Here’s a list of strategies to help you cope:
- Acknowledge your feelings: It’s normal to feel a mix of emotions. Accepting your feelings can help you move forward
- Seek support: Talk to friends, family, or a counsellor. Sharing your worries can make them feel more manageable
- Stay active: Keeping a routine, exercising, and engaging in hobbies can help maintain your mental health
- Update your skills: Whilst you may not feel like you’re in the right headspace, it might be worth taking a look at The Open University to see if there are any free online courses to learn new skills/improve existing skills
- Network: Reach out to professional contacts on employment-focused websites such as LinkedIn and join job search groups to explore new opportunities
- Create a new routine: When you’re out of routine, this can sometimes cause a disruption of productivity. Perhaps structure your day with job search activities, exercise, and leisure to maintain a sense of normality
- Stay positive: Focus on your strengths and past successes to boost your confidence during this time.
What Happens to Debt When You Lose Your Job?
When you lose your job, managing debt can become more challenging as you may not have the funds to cover what is owed. You may find yourself unable to meet regular payments which could lead to potential late fees, increased interest rates, and even negative marks on your credit score. However, it’s important to remember that you have options and resources available to help you through this period.
What to Do About Debt If You Lose Your Job
List All Debts
Start by listing all of your debts. It may be easier to create a spreadsheet so that you’re easily able to keep track of your finances and make edits when needed. Include credit cards, loans, mortgages, and any other financial commitments. Note down the amount owed, interest rates, and due dates.
This will give you a clear picture of your financial situation and help you prioritise which debts need immediate attention.
Claim on Insurance If Possible
Check if you have any insurance policies that can help cover your debts. Some credit cards and loans come with Payment Protection Insurance (PPI) that can assist in making payments if you’re unemployed. If you have this insurance, you might want to contact the provider to start a claim as soon as possible.
Prioritise Outstanding Debts
It’s important to prioritise the debts that have the most severe consequences if left unpaid, such as your mortgage or rent, utility bills, and council tax. These are essential for maintaining your living situation and should be addressed first. For other debts, consider contacting your creditors to explain your situation and request temporary payment arrangements or reduced payments.
Stick to a Budget
Creating and sticking to a budget is important when your finances have taken a hit. Start by listing your essential expenses, such as housing, food, and utilities. Then, allocate the remaining funds towards your debts based on the priorities you’ve set. Look for ways to cut non-essential spending and consider using free budgeting tools, such as Money Helper’s Budget Planner.
For more tips on how to budget during tough times, see Tips for Budgeting During a Recession.
Don’t Be Afraid to Ask for Professional Help
If your debts feel unmanageable, it might be worth speaking to professionals to see what help is available to you.
Debt advisors here at MoneyPlus can provide guidance tailored to your situation and suggest debt management solutions. Options like an Individual Voluntary Arrangement (IVA) or a Debt Management Plan (DMP) can help you manage your debts more effectively.
- IVA: An IVA is a formal agreement with your creditors to pay off your debts over a set period. This type of debt solution allows you to make affordable payments and could be a good option if you owe multiple creditors
- DMP: A DMP is an informal arrangement where you make reduced payments to your creditors through a third party. This can help you manage your debts more comfortably while you get back on your feet
Alternatively, you can get free debt advice at MoneyHelper.
Losing your job can be a significant setback, but by understanding your debts, prioritising payments, and seeking professional advice when necessary, you can manage your financial obligations effectively.
