How to make your redundancy pay last

Man in the rain

It’s vital that you spend your statutory redundancy wisely to ensure you can cope financially until you find a new job.

If you receive a lump sum of cash, you might be tempted to go out and spend it straight away. But think how you will cope if you don’t get another job for weeks or even months. The Budget 2009 saw the government increase the statutory redundancy pay from £350 to £380 a week.

Unless you having savings to fall back on you’ll soon be struggling.

Setting a realistic budget is important. Write a list of all your outgoings, noting whether they are essential, non-essential or dispensable.

Obviously, things such as your rent or mortgage payments, utility bills and loan repayments are essential, but don’t forget to factor in your food spend, travel costs and any other important expenses such as childcare costs. If you have annual costs (home and contents insurance, for example) then divide this by 12 so the cost is spread over evenly month-by-month.

Once you have worked out what proportion of your budget needs to go on essential payments, work out what’s left over. How you use this money is, of course, completely down to you and will depend on your circumstances. However, it might be wise to try and save as much of your spare money as possible to meet your essential payments down the line or help you cope with any unexpected costs. 

Avoid borrowing any money if at all possible. If you don’t know when you’ll start working again it’s not a good idea to run up credit card bills or take out a loan.

Contact your local job centre and find out if you’re entitled to any benefits. You might also be entitled to jobseeker’s allowance. Once you’ve been unemployed for 13 weeks you could also get help with your mortgage interest.

If you are struggling to make ends meet then you can get free financial advice from charities such as the Citizens’ Advice Bureau, National Debtline and the Consumer Credit Counselling Service.