Losing your job does not have to be a financial disaster

With the gloomy outlook for the Australian economy and unemployment expected to rise, nobody is immune to losing their job. Losing your job can be a very stressful time. However there are steps you can take to help you remain financially stable whilst you are unemployed.

1.    Review your financial situation
The first step in preparing for a possible loss of income is to prepare a snapshot of your financial situation. Understanding your financial situation can allow you to put a plan of action in place allowing you to set a realistic budget and identify possible emergency funding sources.

2.    Redundancy Payment
If you are fortunate enough to receive a redundancy payment it is a good idea to seek professional advice to help minimise any tax payable and invest the proceeds wisely.

3.    Emergency Funding
Whilst losing your job can be difficult, periods of sustained unemployment can be financially devastating. The following options are available to help manage your cash flow requirements during periods of unemployment:

• Social Security
  Depending on your situation you may be entitled to up to $486 per fortnight social security payments. Your entitlements will depend on your family and financial situation but generally there is a waiting period based on your ‘liquid assets’.
  

• Super Access
  Whilst your superannuation is your retirement nest egg, depending on your age you may access it in the following limited circumstances
  
  If you are under age 55:
  Generally your only option to access your super is under ‘Severe Financial Hardship’. In this situation you can withdraw a single lump sum of up to $10,000 p.a. after a period of at least 26 weeks on Commonwealth income support payments
  
  If you are 55 and over:
  You may access your super either as a pension or a lump sum but generally only as pension within prescribed limits if you are aged below 60 and not yet permanently retired.
  

• Home Loan Access
  With interest rates at historical lows drawing down on your home mortgage to help meet expenses may be a viable short-term cash flow funding option. However, the following important issues must be considered:
  
  i. Higher debt means higher repayments (which increase as interest rates increase)
  ii. Arrange the finance whilst you are still employed otherwise it will be hard to gain approval
  iii. From a social security perspective an offset account is not recommended as it will delay your entitlements

4.    Insurance benefits
Usually upon ceasing employment any employee benefits such as insurance will cease. However, generally there is a small window of opportunity where you may elect to continue your insurance benefits without further health checks. As insurance is an extremely important safeguard for you and your family’s financial wellbeing, it is generally a good idea to continue with your cover upon ceasing employment and your superannuation fund may be able to cover the cost of the premiums.

Whilst losing a job is often traumatic, with careful planning it doesn't have to be a financial disaster.





Author, Justin Frohnert, April 2009

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