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Wednesday, August 12, 2020

Financial expert reveals the eight things you need to do NOW to prepare for a potential job loss 

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An Australian financial advisor has provided an eight-step guide to help reduce the likelihood of ‘personal financial ruin’ in the event of a job loss.

Helen Baker, from Brisbane, said as the COVID-19 crisis continues it’s important to prepare yourself financially by considering a number of important factors.

She recommends consolidating debts, negotiating for lower interest rates and creating a six-month emergency fund.

‘Australians should get on top of their finances now to prepare for a risk in loss of income,’ Ms Baker said. 

‘I recommend households use financial tools, such as a free budget spreadsheet, to get a realistic view of their expenditure against their income and help get on top of their finances now.’

Helen Baker (pictured) said as the COVID-19 pandemic continues it’s important to prepare yourself financially by considering other financial options

Helen Baker (pictured) said as the COVID-19 pandemic continues it’s important to prepare yourself financially by considering other financial options

1. Consolidate any debts

First on Ms Bakers financial guide is paying back any debts as quickly as possible while still working.

If possible, she said to consolidate credit card debts and personal loans into your mortgage by refinancing your mortgage loan. 

This is because these type of loans often have the lowest interest rates.

2. Negotiate interest rates or move your debts to lower-rate products

After completing the first step, Ms Baker also recommends transferring your card debt balance to a new zero-interest balance account.

‘Be aware of the interest-free term, which is usually six months, after which your interest will return to the full rate,’ she said.

‘With regards to home loans, for the first time rates have fallen to below two per cent – so now is a good time to refinance and save on interest payments.’

After completing the first step, Ms Baker also recommends transferring your card debt balance to a new zero-interest balance account

After completing the first step, Ms Baker also recommends transferring your card debt balance to a new zero-interest balance account

3. Create a six month emergency fund

In a ‘regular’ economy, Ms Baker recommends that households save an emergency buffer of three months worth of expenses – which covers your debt commitment and regular expenses – in the event of a job loss as it generally takes three months to find a new job.

But in the current COVID-19 situation in which job listings have fallen significantly, consider saving at least six months worth of income.

‘You can build up the buffer by reducing your spending to essential items and services, withdrawal superannuation early, or finding a second source of income,’ Ms Baker said.

‘If you are made redundant, the redundancy package can make a sizeable contribution to this buffer, as can your tax return.’

HELEN BAKER’S EIGHT-STEP GUIDE TO PREPARE FOR A POTENTIAL JOB LOSS 

1. Consolidate your debts

2. Negotiate interest rates or move your debts to lower-rate products

3. Create a six-month emergency fund

4. Generate a second income stream

5. Consider a reduction in hours over a redundancy package

6. Consider looking for work while you’re still employed

7. Get a realistic picture of your spending vs income

8. Use your annual leave slowly 

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In the current COVID-19 situation, in which job listings have fallen significantly, consider saving at least six months worth of income

In the current COVID-19 situation, in which job listings have fallen significantly, consider saving at least six months worth of income

4. Generate a second income stream

For those who aren’t working long hours, a second job might be ideal in order to generate further income.

This could be casual, part-time or self-employed work, such as tutoring or Uber driving, or choosing to rent out a spare room or parking space if possible.

Ms Baker also suggested selling unused or unwanted items lying around the house on Gumtree, eBay or Facebook Marketplace.

For those who aren’t working long hours, a second job might be ideal in order to generate further income

For those who aren’t working long hours, a second job might be ideal in order to generate further income

5. Consider a reduction in hours over a redundancy package

‘If your company is starting to discuss a decrease in working hours and redundancies, and offer you a choice, it might be better to have your hours reduced,’ Ms Baker said.

This way, at least you’ll still be earning some form of regular income rather than nothing.

If a redundancy is the only option, you may be eligible for Job Keeper payments after the ‘stand-down’ period.

'If your company is starting to discuss a decrease in working hours and redundancies, and offer you a choice, it might be better to have your hours reduced,' Ms Baker said (pictured left)

‘If your company is starting to discuss a decrease in working hours and redundancies, and offer you a choice, it might be better to have your hours reduced,’ Ms Baker said (pictured left)

6. Consider looking for work while you’re still employed

If you think it’s fairly likely that you’ll lose your job, start applying for new jobs now.

In addition to applying for positions through job websites, Ms Baker recommends networking with potential employers through LinkedIn and joining online business groups to find potential positions.

‘Landing a new role could take a couple of months in a difficult market, and starting early will reduce the chances of being unemployed between jobs,’ she said. 

7. Track how much you spend and earn each week or month 

Ms Baker recommends reviewing all your expenses using a budget spreadsheet that allows you to view your incoming and outgoing finances. 

She says to separate your income into categories, such as spending money, how much you need to save and how much you would like to save.

This way you can easily track how much your spending and saving.

Ms Baker recommends reviewing all your expenses using a budget spreadsheet that allows you to view your incoming and outgoing expenses to help track your finances

Ms Baker recommends reviewing all your expenses using a budget spreadsheet that allows you to view your incoming and outgoing expenses to help track your finances

8. Use your annual leave slowly

Rather than taking a long stretch of leave all at once, consider taking off one day per week or fortnight.

‘If your employer is in the unfortunate position of having to decide who they will stand down temporarily, remaining in the workplace and showing your value might help you retain your role,’ Ms Baker said.

‘It will show the company you are flexible and care about their long-term survival.’

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