The Best Way to Spend Your Redundancy Pay
To some, receiving a large redundancy payout will feel like hitting the jackpot.
Everybody’s circumstances are different and for many a redundancy package will merely be seen as a survival package and what they have to live on while they find another job.But for others who have a new job ready to walk into a redundancy payout is a juicy bonus that brings with it the temptation to splash out.
Whichever category you fall into it is important not to be complacent about your redundancy payout and stretch it out for as long as possible and not gamble it away.
There are a number of ways in which you can spend your redundancy money wisely.
1) Invest in a New Venture /TrainingIf you have been made redundant it might be time to go back to the drawing board and think about a new venture. If you have the time and energy to invest in a new business you might want to reinvest your redundancy money into your career. This could also involve tuition fees for a new course or retraining.
This option will not be for everybody though and you will need to have time to spend on retraining. But if your chosen trade is suffering and there are very few jobs in your industry retraining might be your only option.
2) Save it For a Rainy DayIf you are lucky enough to have a new job lined up straight after redundancy the best thing you can do with your money is to save it.
Depositing your money in a high interest savings account , a savings plan, or an ISA could increase your redundancy pot. A lot of people feel that just because the money is there it has to be spent, but splashing out on little luxuries might not be the wisest move.
3) Pay Off Your BillsPaying off your credit cards and loans might be the last thing that is on your mind when being made redundant, but in the long-term it might save you money to lower your debts.
If you have a substantial redundancy package then you should use as much of it as you can to lower your debts. This in turn will reduce the interest rate you pay on your debts and ultimately lead to you having more disposable income. If however you need your redundancy pay to last you for as long as possible you should think about spending it on more immediate items and only think about lowering your debts when you are financially stable again.
4) Inject It Into Your MortgageThis option is only for those that have a lump sum and can afford to pump some into their mortgage. Paying off a lump sum of your mortgage will reduce your monthly payments and will inevitably reduce the term of the mortgage.
Using your redundancy money to pay off your mortgage might not seem like a very exciting way to spend your money but it makes the most financial sense and will give you extra financial security. Investing in your property should also be seen as an investment and not a waste of money.
5) BudgetWhether you received a large lump sum or a small payout from your redundancy, budgeting is the key to managing your finances. Just because you are living on your redundancy payout it does not mean that you have to give up all of your little luxuries, but it does mean you need to cut down and think about what you spend your money on more wisely.
You should calculate what the minimum amount of money is that you can happily live on each week and then calculate how long your redundancy pay will keep you going. It is important that once you have made your budget you stick to it. You won’t be redundant forever, so while it might seem hard work cutting down on your outgoings it is worth remembering that your circumstances are only temporary.
For most people they will never receive a payout as large as their redundancy pay, but it can be easy to spend this money and not think about the consequences. If you are sensible with your payout it will work to your benefit and make your redundancy easier to handle.