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Are you prepared to cope with redundancy?

Aussies families to face further hard slog - How you can avoid the "Poor House"

In yet another blow to mortgage holders, the Reserve Bank of Australia is now predicting the Australia economy to slow down within the next 12 months and with it, a possible 100,000 job cuts, which would increase the unemployment rate to 5 per cent. This comes at the backdrop of interest rates being at its highest levels in the last 10 years and the lingering uncertainty in the financial markets.

The grim economic outlook has worried the Financial Planning Association (FPA) which is now encouraging consumers to be financially prepared and to seek professional advice in case of sudden job loss and redundancies.

In a statement by Jo-Anne Bloch, Chief Executive Officer of the FPA "Consumers are facing a very volatile economic climate at the moment and the impact of a sudden job loss on the average Australian would cause great difficulty in paying off home loans or covering everyday expenses. Seeking professional financial advice now would better prepare Australians to handle unforeseen circumstances like unemployment or redundancy"

Paul Bilson, a certified financial planner, believes that the greatest benefit to receiving professional advice is that it puts you back in control of your finances and helps you manage your money.

Paul says that one of the most important things to remember is that anyone can be caught in these types of unforeseeable situations. "It can be very frightening when you are caught in this situation and you don't know where to turn for professional advice that could improve your situation."

Paul offers the following tips to becoming financially independent in light of a sudden job loss:

1. Become financially prepared

Becoming financially responsible is important at every stage of your life. Ideally, you should have a plan in place to cover yourself if unforeseen events occur such as a sudden job loss. One of the first things you should do is:

Design a budget

- Work out how long the money you have will last, based on your current spending habits, and how quickly you think you can find work again

- Take this information to a financial planner who will help you to manage your cash flow.

- If you have received a termination payment, your financial planner will determine if you are better off investing the money you receive, paying off your debts or using the money as an income stream.

2. Look for another job immediately

"Look for another job immediately. Don't have a holiday for 6 months and then think to get a job, you are better off taking another job to keep your income coming in and then look for other, better positions from a position of security," says Paul.

3. Choosing the right redundancy package?

"See a planner as the tax differences in the choices can be significant. By placing redundancy funds into superannuation you may save tax but if you are under 55 you cannot access the funds again."

You need to look at your finances holistically and decide on tax, personal requirements and longer term planning."

4. Determine the best way to use a lump sum payout

"Your financial planner can help you to determine the best way to use your lump sum payout depending on your current and future needs."

"Initially, keep the money available until needed or until you get another job. A good place to hold the funds is in the redraw facility of your home loan. It is decreasing the time you have the loan and saving you interest while still being accessible as needed and it is not creating more taxable income that may impact on your tax return in a year you receive a large lump sum. Tax implications vary considerably so speak to a planner."

5. Think about your superannuation and retirement

"If you are approaching retirement, your superannuation may become accessible which may be a help to meet income needs. However, certain Staff Super plans will not allow you to keep the super with the company once you leave so your may need to investigate all options."

6. Centrelink benefits

"Your financial planner can try and maximise any possible benefits. There will be a waiting period based on leave benefits and lump sum amounts received so these need to be explored before making any decisions."

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