Curveballs and best laid plans....

Workerbee999

Just under 2 weeks ago my job disappeared overnight, puff, just like that (you will have seen it on the news). I am coming to terms with it now and just want to thank all of you on this board whose guidance over the years has helped me be in a good position to ride it out.

I thought, why would I need a contingency pot when I have a great redundancy policy and long service - but built it up anyway. Good job as none of those apply in an insolvency situation, just statutory cover. So now I can get by without worrying, and I don’t have to tell my son he has to leave his private school.

I have also spent a number of years maxing pension contributions with 40% tax relief instead of enjoying the good life. So I now have a decent pot that could give me the lower end of what I want @ 55, even if I don’t work again (which isn’t the plan, I want to get back out there and keep saving). I am also not used to living an extravagant lifestyle because I have been saving so don’t miss it as much.

One thing I didn’t follow though was pension above mortgage repayment. I was fortunate enough to be able to do both, but stuck to my gut feel that I wanted the security of no mortgage, even at the expense of not being so tax efficient. I also have no other debt. I am sincerely grateful for that this month.

On to the future of job hunting now, but I am dealing with the discomfort of being “off plan”, rather than what some of my colleagues are facing, I really hope it works out for them.

My greatest thanks to all of you.

Spreadsheetman

Sorry to hear about the loss, but great that your backup plan was in place and ready to go. Good luck with the job search.

sandsy

Losing your job in that way must be truly traumatic.

But preparing as best you can, as you have, alleviates the immediate financial pressures. Hope that your careful planning helps keep you optimistic and that a new opportunity comes along soon.

ratechaser

Just wanted to add my own best wishes here. I've been through the 'sudden bankruptcy' situation with a large global employer - and although it all worked out ok in the end, it was a very unsettling, even traumatic, feeling at the time.

It absolutely reinforces the value of good financial planning because the unexpected has a habit of happening quite a lot. In my case what it also taught me was to give employer share schemes a pretty wide berth in future... that was a very expensive lesson...

Good luck for the future
RC

Albermarle

One thing I didn’t follow though was pension above mortgage repayment.

I see this being often recommended on this forum but a sudden job loss is the weakness in this argument .

even if I don’t work again (which isn’t the plan, I want to get back out there and keep saving).

Even if you can not save in future , having some cash coming in from some kind of employment will at least mean you will not need to raid your investments savings too much, and they will still get chance to grow , even if you are not contributing to them anymore.
Good Luck !

grnglide

I see this being often recommended on this forum but a sudden job loss is the weakness in this argument .

Is that not what a mortgage protection policy and similar insurance is for? Also the reason for the emergency funds?


The important thing is to look at both mortgage overpayment and pension payments and to make a reasoned decision about the path to take.


Anyone who is so fixated about paying their off early should reduce the term!

Mrs_Z

Exactly that happened to my OH some years ago. It was shocking at the time and took a while to sink in. Luckily from the financial point of view we were fine as we had always played it safe when taking out mortgages etc, ensuring that we'd be able to manage out outgoings with one salary alone and also, built up savings when we had two salaries coming in.
The shock for me was more to do with the realisation that the employment contract with redundancy etc was worth nothing. OH was entitled to the statutory redundancy but that took some 6-8 weeks before OH received it. I'd hate to think how a situation like that can have a devastating effect on a family, where maybe just 1 person is working, the other staying at home looking after kids and possibly in a rented accommodation with no savings.
Anyways, fast forward almost 10 years, and OH is doing better than ever!
You're covered from the financial point of view, so make the best use of this unexpected 'holiday'. You will find another job sooner or later. There are always jobs for those who want to do them!

JoeEngland

grnglide wrote: »

Is that not what a mortgage protection policy and similar insurance is for? Also the reason for the emergency funds?


The important thing is to look at both mortgage overpayment and pension payments and to make a reasoned decision about the path to take.


Anyone who is so fixated about paying their off early should reduce the term!

But isn't it better to pay down the mortgage early rather than put it into mortgage protection insurance? At least that way if you don't need to claim on the insurance, which most people won't, you haven't sunk money into that instead of using it for something else. Over a typical 25 year mortgage term the insurance would add up to a significant amount.

kangoora

ratechaser wrote: »

Just wanted to add my own best wishes here. I've been through the 'sudden bankruptcy' situation with a large global employer - and although it all worked out ok in the end, it was a very unsettling, even traumatic, feeling at the time.

It absolutely reinforces the value of good financial planning because the unexpected has a habit of happening quite a lot. In my case what it also taught me was to give employer share schemes a pretty wide berth in future... that was a very expensive lesson...

Good luck for the future
RC

Just because you've been burnt on employee share schemes doesn't mean they aren't good at times. In my case, 2 out of 3 times I was in a sharesave scheme it was very lucrative. The third occasion I simply broke even. It may, however, depend on what you do with the shares you acquire......

I cashed in all my shares in late 1999 in a major global company - got a new car, home setup costs and new furnishings (circa $50k) after a move to USA. I left $8k in as an 'investment' along with future share purchases. 2 years later I withdrew my $2k (what remained of $8k) after the dot com bubble burst and my entire division was made redundant. It was pure luck here that I maximised my income gain on 80% of the shares (at least 4 stock splits, maybe more) with the timing of my move to USA.

Fast forward circa 15 years and a different 5 year saveshare scheme went from £14k saved to circa £90k in shares. I rapidly divested myself of the shares using mine and wifes CGT allowance over the next couple of years after my last experience. If I'd continued to hold the original shares my £90k would now be worth around £41k - still nice but £50k less than peak.

In a typical sharesave scheme you cannot lose, if the share price is less than you have in the option then you just withdraw the cash you have saved and decline the option to buy. All you have lost is the 'opportunity loss' if you had invested in something else. Maybe yours was something different? Even if you are buying discounted shares from salary then you should be moving them on as soon as possible, converting to other assets that are less volatile and not closely linked to your employer - double whammy scenario.

I was lucky once (USA) but the 2nd time I cashed in the shares as quick as I could to diversify out of a single company share and that time I made my own luck.

hugheskevi

Personally I view mortgage vs pension vs ISA as a balance to be struck between financial efficiency and financial resilience. Pensions come top for efficiency, but before age 55 are very poor for resilience (unless you value being able to claim more means-tested benefits in the event of trouble).

S+S ISAs are a good, flexible way to have resilience whilst sacrificing little or no efficiency. In the event of need they are there to draw on, and if the need doesn't arise they can be used to fund living costs to enable more to be directed into a pension later in life so you don't lose out on the efficiency of tax relief. Mortgage payments give limited financial resilience, but may be efficient if they enable a lower interest rate, eg, down to about 60% loan-to-value.

I found that very early in life, financial resilience came from insurances such as death, ill-health, redundancy, etc. As my ISAs grew in size, they became sufficiently large as to be able to fund several years of living costs if required, providing very good resilience to financial shocks.

Eventually ISAs grew beyond the size of my mortgage and other (efficient) debts. At the current time our household position is mortgage at £45K, 0% credit card balance at £50K, cash/savings at £52K and ISA balance at £166K. Making full ISA contribution for my wife and I each year is priority (hence why holding so much cash saving currently), with extra going to mortgage (pension is already adequate from previous additional contributions, so there are limited additional contributions to that now).

Putting all spare money into a mortgage can actually reduce resilience, which I think is best measured as the period for which you could fund normal living from existing resources if all income ceased immediately. You are more resilient with a larger mortgage but funds to make repayments than with a smaller mortgage but far less funds to meet repayments.

Thrugelmir

hugheskevi wrote: »

You are more resilient with a larger mortgage but funds to make repayments than with a smaller mortgage but far less funds to meet repayments.

A smaller mortgage can (possibly) be rescheduled over a longer term. Larger mortgage also offers less flexibility to downsize as less equity available.