I got made Redundant! How pre planning helped.

So, I got made redundant last week. Emotionally, while that was pretty big news, it was something that I had an idea that might happen for some time. The company I worked for is going through a round of cost cutting. So while we were ready emotionally, redundancy also has a big financial impact. Luckily, we were prepared. This is the story of how we set ourselves up.

Redundancy plans

We’ve had a plan for redundancy (or any other financial disaster) in place for a couple of years. Build that plan involved a couple of steps:

1. We know our spending

Because we regularly track our spending, we know what we spend each month and where it goes. This is a vital building block in our redundancy planning. Our spending is split between mandatory expense such as mortgage payments, groceries and cost centers #1 and #2 school fess, and discretionary costs such as home renovations, nights out etc. This allow us to simply stop all discretionary expenses while there is no income coming in. It also allows us to carefully track mandatory expenses, so that we know exactly how much is going out.

We track our discretionary and mandatory expenses each month. In redundancy we know where it goes.
We track our mandatory and discretionary expenses each month.

We have recently begun digging deep into the data on our food spending. Not only has this given us a good insight already into our biggest cost after the mortgage, its also the one we can change quickly. While cutting out the feta and brie might hurt the taste buds a little, it will do wonders for our wallet and our waistlines!

2. We have a cashflow plan

Knowing where the money goes is only part of the story. The next piece is to know how long we can ‘last’ until financial Armageddon hits us. Luckily for us, my payout is substantial., so we don’t have to worry in the immediate future about cash.

We also have our emergency fund, with three months spending put to one side. This means that even if there is a dispute over the redundancy payout (and court action should never be discounted), then we still have enough savings to get by for a period of time.

redundancy cash flow forecast
Weekly cash forecasts post redundancy

We have used our existing, detailed financial data to work through a detailed cash forecast. This includes all known bills, as well as a buffer for ‘extra’ spending. Life doesn’t stop just because I lost my job. The kids will still have school activities, I’m still racing triathlons and Mrs Smith still wants to buy things every now and then. This costs money.

3. We were emotionally prepared

I think that this might be the most important element of surviving redundancy. No matter how big the payout nor how much savings you may have set aside, the emotional shock could easily send you off kilter. I am a practitioner of stoic philosophy. Basically this means we were emotionally prepared for the shock of a big event. Not that it doesn’t hurt. I am human afterall, but at least I have thought through the potential consequences.

IN conclusion, we know that we will be fine. Whether it takes a 1 day or 365 days to land a new role, or to find an alternative source of steady income, our financial plans helps take away a lot of the stress of redundancy.

James Scott

James Scott is a personal finance expert with over 20 years experience. He believe that money should not be stressful. By using the Stress Free Money pyramid it helps everyone achieve their financial dreams.

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5 Responses

  1. March 3, 2019

    […] big news of the month was that I got made redundant. Luckily for us, we were prepared, both emotionally and financially. The big issue at the moment is […]

  2. March 19, 2019

    […] all the spare time I now have, being redundant and all, I have had plenty of time to read personal finance and FIRE blogs. There is some very interesting […]

  3. May 20, 2019

    […] bit of lumpiness to our cashflow inflows. We also get large, lump sums from time to time such as redundancy payments. Mrs Smith also works on a part time basis, so her income goes up and down depending on how much […]

  4. May 29, 2019

    […] still not quite there yet. Redundancy put a slight spanner in the works. But it won’t be long before were back making good money and investing […]

  5. June 8, 2019

    […] angst out of our personal finances. We know what comes in, where it goes and rarely get surprised. We were even ready for Mr Smith’s redundancy. Money is there to help you – it shouldn’t cause stress in your […]

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