Money matters - May 2009

The 3R's - Recession, redundancy and restarting

For some of us we have survived "the recession we had to have" in the 1990's, for others this may be the first time you have ever experienced a "recession". This financial crisis is slightly different to the last given the advancement in global awareness and global trading. This is a worldwide phenomenon. What can you do in these situations? There are many aspects to this situation - mindsets, what is happening to businesses, survival, maintaining your relationships through such financially stressful times, job security and so on. How is the situation affecting you?

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Are you looking down the barrel of redundancy? I know it can be a stressful time and you'll have some very important decisions to make. Do you start looking for another job, possibly retire or maybe start your own business? We are all very different and you'll need to think carefully about what options are available to you and what suits you best. One of those important decisions is going to be, what will I do with my redundancy payments? The choices you make now may have a substantial impact on your financial position, now and in the future.

Things to consider

As a start, think about your entire financial situation. This will help identify important factors such as your short, medium and long-term goals. If youve not got another job to go to you should consider setting aside enough cash to replace your earnings until you do. You may want to consider the Government's Newstart allowance and if eligible, think about getting your application underway as soon as you can.

What about your home loan or other debts?

Paying off personal debts can be a smart move, given the potential savings on interest. But before you jump in and pay off your debts, you need to consider the tax implications when receiving certain redundancy payments as cash and evaluate your alternatives as there maybe better options for your back pocket. For instance, topping up your super to save on tax.

What about your insurance?

When you stop work with an employer theres a possibility that your insurance cover such as life and income protection may stop as well. It's important that you understand how your cover may be effected, the time you have before the cover lapses and your possible continuation options. A review of your insurance requirements with a qualified Financial Adviser is also a good idea so you know you're adequately protected.

Major expenses coming up?

Have you organised and booked a holiday? Or maybe you'll want to pay out your car lease. You need to ensure that you provide for any major expenses and that you'll have enough money left over to not leave yourself short.

What about retirement?

Chances are your redundancy will impact on your retirement goals. Will you have enough to retire when you want to, now that you've been made redundant? There could be some great advantages to rolling over some of your redundancy into your super. For instances, rolling over the Eligible Termination Payment component of a redundancy package may be a great way to minimise the tax you'll pay on that payment.

No job to go to? Consider a newstart allowance

Newstart can give you some income to help you meet your day to day expenses while you look for a new job. You may be eligible if you are aged 21 or over and under the Aged Pension age, looking for paid work and not involved in industrial action. To lodge a Newstart allowance claim you must be an Australian resident and you'll need to satisfy an income and assets test.

Need help?

Going through a redundancy can be an extremely stressful time, knowing what to do with your redundancy payments should not. You've got enough on your mind with finding a new job, making ends meet and re-evaluating your goals without the added pressures of how best to treat your redundancy payments.

Consider talking with a financial advisor on topics such as:

• improving your cashflow
• tax effective strategies
• growing your investments
• managing your debt, and
• estate planning

Infocus provides advice to employers through their "Workplace Education Program", and personal advice to individuals.

Helen Baker Financial Adviser, Brisbane City Office Infocus p 07 3123 6947 e helen.baker@infocus.com.au w www.infocus.com.au

Disclaimer: This document has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained in this document is General Advice and does not take into account any person's particular investment objectives, financial situation and particular needs. Before making an investment decision based on this advice you should consider, with or without the assistance of a securities adviser, whether it is appropriate to your particular investment needs, objectives and financial circumstances.