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If made redundant, a personally trying and transitionary time for most, getting a redundancy payment can help soften the blow of losing your job. Deciding on what to do with your redundancy package can be a minefield. Our checklist will help ensure your personal finances are being looked after in the most responsible way possible;
First and foremost, ensure your pension is in good shape!
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- If you have the means, top-up your pension before leaving employment.
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- Get up-to-date details of your pension, and ensure your Leaving Service Options have been requested via the Trustees of the scheme.
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- Make sure the Trustees have your current contact details and know what communication to expect and from whom.
Review your everyday finances:
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- Ensure to keep up payments on essential items such as Private Health Care or Life Assurance.
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- Have you Store Cards or Credit Card debt charging high-interest rates? These could be cleared down as a priority. Or have you a large car loan with high interest?
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- Review your mortgage. Consider whether it is worthwhile paying off some of your mortgage? This will depend on whether your interest rate is fixed or variable, and the type of mortgage you have (e.g. a Tracker Mortgage – should leave alone!).
What will I do with my lump sum?
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- Have you funds in a ‘rainy day fund’? If not try and put between 3 to 6 months net salary into a deposit account or credit union for immediate access.
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- Ask yourself if you need your funds to grow a little over time to meet a specific need like college education for kids?
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- Are you happy with negative interest rates eroding the value of that lump sum for the next few years? Or would you prefer to invest in unit-linked funds and have a regular income?
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- Do you need to invest in yourself – do you need to upskill or retrain? Investing in education can help increase your future earnings and opportunities.
If don’t need your redundancy money straight away you may decide to save or invest it.
Deciding where you want to save or invest will depend on how long you plan to save, how quickly you want to be able to get at your money, and how much risk you are prepared to take. If, for example, you get a €50,000 lump sum, you might want to keep some of it for everyday use/immediate access? and invest the rest.
With so much going on during this time, it is important to reduce your stress levels, not add to them. Contact a reputable Financial Adviser to help you figure out the best course of action.
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