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Losing your job: financial tips and support
Manage your money, deal with debts and more
Losing your job can put a huge strain on your household finances as your regular income is likely to drop. You may need to look for other ways to replace any lost income or cut back on your spending.
You may have savings, be entitled to state benefits or receive a redundancy payment which can provide you with some money to help you in the short term. Whatever your situation, it’s important to review your income and spending straight away to help you stay in control of your finances.
You can navigate through the guide using the table of contents, or if you'd like to read the guide end-to-end in full, you can download a PDF copy.
Your household income
Your household income might come from several sources including:
- Any income anyone you live with receives.
- Any state benefits you’re entitled to such as Jobseeker’s Allowance, Universal Credit, benefits to help with housing costs if you’re renting or mortgage payments if you’re buying your own home, and Council Tax.
- Any insurance you have which pays out if you lose your job. This could be income protection insurance which pays you a proportion of your old income for a fixed period. Or you may have payment protection insurance which covers your repayments on a loan (such as a mortgage, credit card or a bank loan) if you’re made redundant. These policies usually only pay out for up to a set period of time so you want to claim as quickly as possible.
- Any other money you have which could supplement your income if necessary. This could include any redundancy payment you receive and any savings you have. If you lose your job part way through the tax year (which runs from 6 April to 5 April) you might be able to claim a tax refund from HM Revenue & Customs.
The best way to get a clear picture of your spending and how much money you need to manage on is to draw up a budget. This is a list of everything you have coming in and everything you spend. It’s likely to be a long list so it helps to group together areas of spending such as household bills or transport so you don’t miss anything out. You can use a budget planner to help you with this.
Your budget should include all your spending – not just your weekly or monthly expenses. As well as regular spending, you need to include irregular/occasional spending such as for annual insurance policies, Christmas, holidays and visits to the hairdresser.
Work out how much you spend on these each year and then calculate how much you need to set aside for these in your weekly/monthly budget.
When you draw up or review your budget think about how it might change now that you’re not working. For example, you won’t have transport costs to work but your heating bills might increase if you’re at home for more of the time. If you pay for help in the home you may no longer need this if you’re not working. You may also find you don’t have to pay for certain insurance policies such as life insurance and critical illness cover if you selected waiver of premium when you took them out. This ensures your contributions are paid for you if you lose your job. Check your policy to see if you have this cover.
Dealing with debts
Keeping up with the repayments on any loans you have can be a real worry if you lose your job. Here are five steps to dealing with your debts.
- Make a list of all your debts including details of the outstanding balances and how much you pay each month.
- Claim on any payment protection insurance you have taken out for these. If you’re not sure if you have insurance ask your lender as they will know if you took out insurance through them.
- Prioritise your remaining debts. Priority debts are ones which have serious consequences if you don’t pay them. For example, if you don’t pay your mortgage or rent you could lose your home, if you don’t pay utility bills you could be cut off. Non-priority debts are things like credit card bills, bank overdrafts and catalogue debts where the consequences for non-payment are not as serious.
- Work out your budget and see how much you have available for paying off your debts more quickly once you’ve paid for your essentials such as household bills, living expenses and any repayments and interest on anything you owe.
- Start paying off your debts. As well as any money you have left at the end of each month, you could also use any redundancy cash or savings you have to help pay off some of your debt. Start with you priority debts first.
If your income is less than your spending you’ll need to find ways to either increase your income or cut back your spending if you’re to stay afloat and avoid falling into debt.
If you have any savings you could use these to make up the shortfall for as long as possible. If you have a spare room in your home you may be able to rent this out. You can earn up to £7,500 a year tax-free from letting out a room in your home. This is halved if you share the income with your partner or someone else. If you rent your home, you should ask for permission from your landlord.
Another option is to reduce your spending. Your budget might reveal where you’re overspending or could make cuts. You could review regular bills such as your mortgage, gas, electricity, water and any insurance policies and use comparison websites to find potentially better deals
Where to find out more
You can find out about state benefits if you lose your job at:
You can check what grants you might be entitled to at:
You can find out about getting a tax rebate at:
For more on the rent a room scheme see:
You can find a budget planner at:
You can find out more about cutting your energy bills at:
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