In the current economic climate, plenty of New Zealanders are concerned about job loss. If you are worried that your job may be on the line, then it’s a good idea to take some steps now to prepare financially for the worst-case scenario. Here are 10 money moves that may help put you in a better position.
1. Prepare a bare-bones job-loss budget
Your first step is to figure out exactly how much money you need to survive each month, which is why you need a bare-bones budget. It only includes necessities such as food, shelter and utilities, with no discretionary spending. It will help you work out how much money you need in your emergency fund (see step two).
What you should include:
- Mortgage repayments/rent
- Electricity and gas bills
- Insurance premiums
- Minimum debt repayments
- Childcare/school fees
- Basic phone plan
- Petrol (enough for basic transport)
What you shouldn’t include:
- Eating out/take away
- Entertainment services such as Netflix
- Recreational activities/hobbies
- Household items that aren’t essential
- Personal care, such as manicures and cosmetics
2. Make your emergency fund a priority
It’s vital to have some money set aside for a rainy day. If you don’t already have an emergency fund, then it should be your top priority – even ahead of paying extra on your debt. Mortgage repayment holidays have been extended through to the end of March next year, so getting ahead on loan repayments is probably not as important as having cash in reserve.
Obviously, you can’t buy groceries without cash, but you may be able to defer loan repayments. So, redirect any spare cash you have towards building up your emergency fund. If you already have a stash of cash put away, that’s great, but ask yourself if what you have is enough.
Build up at least a three-month job-loss income buffer. Commit to not touching it unless you are made redundant. If you work in an industry where there aren’t a lot of jobs, you should aim to save enough to cover six months of your basic expenses, as it could take you longer to find work.
3. Have a plan to tackle any ‘bad’ debt
Building an emergency fund should be your top priority. But, once that’s done, shift your focus to any ‘bad’ debts, such as credit cards, buy-now-pay-later services and personal loans. After you accumulate your job-loss emergency fund, start hammering down your highest interest-rate debt.
If you’ve several high-interest debts, you may want to look into consolidating them into a single loan. One of the advantages of consolidation is that you’ll only have to worry about one single repayment, rather than several. And you might also be able to secure a lower interest rate.
4. Cut back on your expenditure now!
You don’t need to wait until a job loss to save money! Try living on your bare-bones budget now, and put any extra money towards your emergency fund. If that feels too extreme, then at least try to reduce your spending in some areas.
For example, limit eating out to once a fortnight, or only subscribe to one streaming service. It’s important to think before you spend. You might also want to hold off on any large purchases, such as upgrading your car or TV, until you feel more financially secure.
5. Consider refinancing your home loan
When your mortgage comes up for renegotiation, always try to secure a lower interest rate. If there are better deals out there, give your existing lender the opportunity to match the rate. If they won’t come to the party, then you may want to think about refinancing while you are still employed, as you might not be able to if you lose your job.
Make sure you factor in any costs that come with refinancing before making a switch. Switching to a loan with a lower interest rate will not only reduce your monthly repayment obligations, but can save you big bucks over the life of the loan.
To give you an idea of the potential savings, let’s say you have a $400,000 home loan and are paying 3.5% over 30 years. By switching to a loan with the current lowest rate (2.45%) on Canstar’s comparison tables (as of 14/8/2020), your monthly repayments would drop from $1,796 to $1,570. That’s a saving of more than $80,000 in interest over the life of the loan.
6. Sell unwanted items
Now is as good a time as any to take a look around your house to find if there is anything you can sell to make some extra cash. It could be smaller items such as books, DVDs and toys, or a big-ticket item, such as a spare TV in a bedroom. Every little bit can count.
7. Look for new sources of income
Think about ways you could bring in some extra money. Every dollar you generate outside of work is a dollar better off you’ll be if you lose your job.
Everyone has a hobby or something they get excited or are passionate about. Allocate some of your spare time to sharing your passion with other people. If you love something, chances are there are other people who love it, too.
People spend money where their passions lie, so start a side hustle offering some kind of product or service in that space. Your product could be information, photos, help, advice, coaching, ‘done for you’, cleaning, or anything else that might fit the passion.
8. Update your CV
Take some time to refresh your CV with any recent work accomplishments and your most current role and responsibilities. The same goes for your LinkedIn page – make sure it’s up-to-date and shows you in the best possible light.
While you’re at it, take the time to look at your social media accounts, as they are of increasing interest to prospective employers. If there’s anything that you think could hurt your chances of scoring a job, then clean it up.
9. Understand your rights
Dig out your employment contract and find out your entitlements should you be made redundant. You can get more information about redundancy pay and entitlements on the IRD’s website.
10. Find out what government assistance may be available
Even before it happens, it can be a good idea to find out whether you’re eligible for financial support if you do end up losing your job. WINZ has details on its site of the payments you could be entitled to. If you lose your job (including self-employment) up until 30/10/2020 due to the pandemic, you may be eligible for the COVID-19 Income Relief Payment. You can also find help managing your money at MoneyTalks.
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