The oil and gas crisis has left thousands of people out of work. Allan Gardner, financial services director at Aberdeen law firm Aberdein Considine, highlights some of the financial implications of losing your job.
The falling oil price has had a devastating effect on those who work in the energy industry.
For thousands of people, what was a healthy, secure income has evaporated and in some cases this has literally happened overnight.
With little sign of the Brent crude price recovering in the short term, many more workers will be worried about their financial future.
There are some simple steps you can take to protect yourself as best you can should the worst happen.
Firstly, do a full analysis of your debt. If you are still in work, your credit rating is going to be higher now than it will be if you lose your job.
If your current debts are not at cheap interest rates, it’s best to shop around sooner rather than later in order to try to cut costs.
Secondly, you should look at paying off debts. If you have any spare money, use it to clear credit cards or loans. The cost of most debts vastly exceeds the interest earned on savings.
However, it is important you also have access to emergency funds if you need them. If you decide to repay debts but it takes longer than planned to find a new job, you may need money later on for day-to-day living.
Thirdly, check for any mortgage payment protection insurance, payment protection insurance, or short-term income protection insurance you may have previously taken out. If you lose your job or are too ill to work, you may be able to make a claim.
Because of the way these policies were sold you may not realise that you have had this cover. Ask your lender whether your mortgage, loan or credit card is covered by insurance. If you already know that you are at risk of redundancy, it’s probably too late to take out payment protection insurance.
Most policies have clauses that will refuse to pay out if you knew you were to be made redundant when you started the insurance or if you lose your job within the first few months of taking out the policy. If you are aged 55 or over, accessing your pension fund could be an option.
Pension planning can be hard to understand at the best of times so if you are in doubt about what to do, it is important to talk to an independent financial adviser, such as Aberdein Considine, before making any major decisions.
Finally, there’s nothing more important than running through all your finances to see what bills you can cut and doing a full budget to ensure you are spending within your means.
To be truly prepared, if losing your job is likely, start living now as if you’d already lost it. Cut back on everything and put spare cash away to help you live when there is less income.
Allan Gardner is Financial Services Director at Aberdein Considine, which has a team of independent financial advisers across Scotland.
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