On the one hand you might feel you are embarking on a new exciting path or you might be sad to be leaving a role you liked and anxious about financial security and career direction. To make the most of the challenge and opportunity that is voluntary redundancy it's essential to take control of the money you now have in your bank account. Here are 6 simple steps to help you make the most of your redundancy pay:
Deciding what to do with your payout is crucial, but you don't have to make decisions immediately. First seek financial advice that's tailored for your particular situation and personal financial goals. In the meantime don't leave the lump sum in a current account. Put it in an easy-access savings account, so it earns some interest while you make up your mind. Most importantly, think carefully before spending it on short term goals like Carla.
I got a lump sum payout of $42K when I was made redundant last year after a department restructure. We took the family trekking in Nepal for a month. It was a fantastic experience and now I wished we'd used it for the deposit on a house. It was a bit of a wasted opportunity to be honest. Also, it took longer that I thought to find a new job so having the money there would have saved me a lot of anxiety. Lesson learned! Carla.
Use a budget planner to work out how much you will need each week or month, and how long you can make the money last. Remember to factor in any employment package extras like car allowances you may have been accustomed to. You won't need all your money at once, so keep some in a savings account, and only transfer it when you need it.
Take the opportunity to use some of your money to pay down debt, if you have a redraw facility, putting it into your home loan might make good financial sense. Paying down debt makes sense in the short and long term. Again take financial advice about what debt to tackle first.
Putting extra money into your super is a tax efficient way to boost one of your most important investments and depending on how old you are, it could be essential to creating a more comfortable retirement in the near future. However, you will also be locking it away, so don't put more than you can sensibly afford into this long-term savings vehicle. Again speak to an expert about what the best strategy is for you.
Using your lump sum as a way of creating wealth is a great goal. Consider how long you want to invest, what you want to achieve and how much risk you are comfortable taking. Watch this video on what to do with a lump sum of money.
You might consider putting some money into an emergency fund to help with any unexpected costs. Also consider insurance for both now and the future, so that redundancy does not have a negative impact long term. Watch Trisha talk about how she protected herself and her family from redundancy.
This information is current as at 09/03/2015.
BT Financial Group - A Division of Westpac Banking Corporation. This document provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied up on as such. This information does not constitute financial advice. It has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness having regard to your objectives, financial situation and needs. Information in this blog that has been provided by third parties has not been independently verified and BT Financial Group is not in any way responsible for such information.