Being made redundant can be terrible for a lot of people. What will I do, where will I work, who will employ me, how will I put food on the table and pay the bills. It can be a devastating time of uncertainty and distress. Redundancies often come unexpectedly with little or no notice and while they are generally accompanied with a severance payment, the sudden loss of regular income can erode any lump sum payment very quickly. This is why we recommend having some savings or an ‘emergency fund’ to help get you through the tough times, but what if the opposite happens, what if you’ve got your future hanging on that lump sum payment that never comes?
I have recently seen a situation where a business was restructuring its operations and called for voluntary redundancies, and unfortunately, there were a lot more applications than redundancies on offer. Interestingly the talk amongst many of the applicants was around how long they had been waiting for a redundancy, even putting off retirement or other job opportunities in the hope of getting one, only to be unsuccessful. This was equally devastating for those employees who had factored a lump sum payout into their retirement nest egg.
Redundancies or golden handshakes are never a guarantee (for most of us) so it is unwise to include them into any financial planning you do. To rely on using ‘uncertain’ sources of cashflow or funds to plan your future or retirement is fraught with danger. Cash injections like redundancies, golden handshakes, bonuses, winnings, lotto jackpots are unknowns in timing, amounts or whether they occur at all. Even an expected inheritance from a still living person has uncertainty surrounding timing and magnitude and cannot be fully relied upon.
While a lump sum cash injection is great for anyone who is fortunate enough to be the beneficiary of it, treat it as that; stroke of fortune. Where possible, use only known or accurately estimated figures when constructing a plan for your future. Sure, there are some unknowns, like investment returns and expenses, but we are able to make reasonably accurate estimates based on your past personal spending habits or predict your returns using long term averages. By doing this, we are planning for the most likely outcome, not the most desired. By the way, in case your interested, the odds of using a Powerball jackpot to fund your retirement are approx. 1 in 76 million. Best look at some alternative options.
For help planning your financial future, give the team at Steve May a call and start the conversation today.
You need to consider with your financial planner (or adviser), your objectives, financial situation and your particular needs prior to making an investment decision. Sensibly Pty Ltd and its authorised representatives (or credit representatives) do not accept liability for any errors or omissions of information supplied on this website
Nick Shanley, Steve May, Luke Styles and Shanley Financial Planning T/A Steve May Financial Services are Authorised Representatives / Corporate Authorised Representative of Sensibly Pty Ltd, AFSL 533923. Please refer to our website at www.stevemayfs.com.au to reference our Financial Services Guides.
