Unemployment
Involuntary unemployment is difficult to cope with at the best of times, but from a financial perspective, its impact can be devastating.
In the short term, it creates hardship if you do not have savings to live on. In the long term, if you do not return to work quickly, and with a similar income, unemployment can create a significant barrier to achieving your financial goals.
- In the most recent survey of retrenchment and redundancy in Australia, 52 per cent of those retrenched were aged 25-44 years.
- The most commonly affected male occupations were tradespeople and related workers.
- The most commonly affected female occupations were intermediate clerical, sales and service workers, and professionals.
- More than three-quarters of those retrenched were given notice of less than five weeks.
Is there any way to prepare for redundancy?
Understanding the changes taking place in the employment market is an important first step to minimising the risk of unemployment. We live in a world where a ‘job for life’ is no longer standard.One of the best ways to be prepared is to continue enhancing your education and training. People with higher levels of education tend to have lower rates of unemployment, especially long-term unemployment. By continuing to broaden and enhance your knowledge and skills, you can be more assertive in managing your career.
Taking personal responsibility for your own career is vital, and by obtaining professional career guidance, you may be able to minimise the risks you face.
Keeping an emergency money supply equal to three months of your take-home pay can help you ride out short-term stretches of unemployment. A cash management trust or an internet savings account can provide a safe place that is within easy reach, so you can get hold of your emergency fund when you need it.
While you cannot directly guard against the risk of unemployment, you can transfer some of the associated risks. For instance, some insurance companies provide short-term cover for large debts.
How do I go about dealing with redundancy?
There’s no way to ease the pain of being retrenched. It can prompt a period of soul searching and reflection, and forces you to reassess your long-term priorities and goals.Unexpected redundancy raises many pressing immediate questions.
- How long will it take you to find another job?
- How long will your redundancy payout last?
- How will your family live in the meantime?
- Could you start your own business instead?
- Where should you invest your superannuation benefits?
- How will you cope with ongoing financial commitments like your mortgage and credit card repayments?
- Is early retirement a desirable option?
As well as a threat, redundancy can also be an opportunity to start afresh in a new field or finally start working towards your dream career.
How do I go about finding another job?
Your emotional response to redundancy depends a great deal on your age and background. The younger you are and the more marketable skills you have built up, the easier it may be to treat retrenchment as an opportunity rather than a threat.Whatever your circumstances, you can look for openings in your line of work through the usual avenues such as newspaper advertisements and employment agencies.
In some cases, redundant employees can be victims of long-term economic trends such as offshoring or technological advances. If work in your trade or profession is becoming harder to find, you may need to look further afield.
You could use your existing qualifications and experience to find work in another field or even start your own business. Alternatively, you might consider retraining in a new field. A recruitment consultant can help you match your skills and goals with a new career path.
What should I do with my redundancy payout?
In some cases, redundancy payments can be quite substantial and it can be tempting to use the funds to reduce your home loan. But unless you know when you will be starting work and receiving a regular income, you may be best advised to hold off on making any quick decisions.Your monthly mortgage repayments are likely to be among your biggest expenses. If you think you’re likely to have trouble meeting your repayments, it’s worth talking with your financial adviser about ways to restructure your finances before discussing options with your lender.
Redundancy is a period of uncertainty and access to your money is therefore important. Be wary of tying up your payout in investments that penalise withdrawals until you know when you will be receiving a regular income again. In the interim, a cash management or online saving account can provide a reasonable rate of interest while ensuring your funds remain accessible.
Can I get any help meeting my living expenses?
You may have to spend part of your redundancy payout, such as money from accrued annual or long service leave, before you’re eligible for government income support. You may also be eligible for social security benefits, such as Family Tax Benefit, subject to asset and income tests. Waiting periods may apply, particularly if your redundancy payment includes a component of annual leave, sick leave or long service leave.It’s a good idea to register with Centrelink as soon as possible to find out whether you’re eligible for any payments.
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As at 30th March 2011, AXA Asia Pacific Holdings Limited and all of its Australian and New Zealand subsidiaries ceased to be members of the Global AXA Group and became members of the AMP Group.
