You and your money

Ten Tips for getting out of debt

Some suggestions for using your money wisely

Redundancy payment can be the biggest lump sum you ever get and so represents a great opportunity. On the otherhand it may have to last a number of years so don't spend it all at once! Consider paying off your debts. Advice is key. Keep an emergency fund. Consider all investment options. If you are going to be claiming benefits there are some constraints on how you can spend redundancy payments.

Paying off your most expensive debts (those you pay the highest interest on) is often a good move before even starting to think about investing any redundancy payments. There are few if any sensible low risk investments that pay you more than you are paying out on servicing debt. Reducing or paying off your mortgage if job prospects look poor or you will take a major cut in salary will reduce your usual outgoings.

See our ten tips for getting out of debt. Click here to read more..

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Independent Financial Advice

You are wise to consider taking independent financial advice. You have a choice of advisors:

a) One who is paid from commissions on products you buy
or
b) One to whom you have to pay a fee.

Some people are concerned that commission payments mean advisers who take them are not fully independent. This is because
some companies pay more in commissions than others. However the advice from independent financial advisers paid by commission is free to you, the client. Some people think fee based advisers, not influenced by commissions, are more likely to give genuinely independent advice.

You can get a list of three independent financial advisers in your area from the IFA on its web site

Telephone on 0117 971 1177

Many financial advisors (including many bank managers, building societies etc) are tied agents ie they are only able to sell a particular company's products.

Emergency Fund

If you are getting a decent redundancy payment use that as your emergency fund. If you are not getting a decent redundancy payment make sure your savings are easily available in case you need them to pay bills. This is far cheaper than borrowing!
Put them in the best-paying easy access account you can find. How much? Probably 3 months expenditure will be about right for many people.

Investment options

These are numerous and need careful consideration as to what is right for you , for example

You may feel under pressure to make decisions quickly. Resist! It is a lot easier to make bad investment decisions than it is to make good ones. Research your options carefully and only invest when you are sure that you understand what you are investing your money in.

Investing your lump sum in setting up a business is considered by many people upon redundancy. Think about this very carefully because if you own business fails you may end up with nothing.

Generally keep any redundancy payment lumps in easily available accounts until things start falling into place. Having cleared your debts (if any!) and found a new job, then is the time to consider tax-efficient investments such as Isas or National Savings for your lump sum.

Here are some useful personal finance sites.

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