How to Prepare for Retrenchment?

b1ackmai1er on 20/03/2020 - 08:17
Last edited 20/03/2020 - 13:07 by 1 other user

Looking for advise on how to financially prepare for likely retrenchment as a single person.

What I would like to achieve:

.. Protect my financial assets from Centrelink.
.. Minimise the risk of losing my house.
.. Maximise my entitlement to Centrelink support.

Specifically for my situation:

.. I have a small mortgage $42000. Already pay a big portion of my wage on this. Should I tighten my belt further and pay every spare penny on it.

.. I have about $2000 cash. In lieu of above should I divert spare pennies to a (non bank) cash fund?

.. Had about $40,000 in shares at pre covid-19 market crash (probably now $20000). Should I sell and divert funds to mortgage or cash now?

.. I'm a long term employee under an EBA and would likely received a substantial termination payout $20,000+. How do I protect it?

Would a financial adviser be worth going to see or is that a waste of money?

Are there any online financial forums where I could get advice from savvy people?

I'm not trying to be greedy, I'm just don't want to end my working life in poverty.

Thanks.

Financial

Comments

  • 87percent on 20/03/2020 - 08:19

    i would be checking out (and posting to) r/AusFinance on reddit

  • Belgarath on 20/03/2020 - 08:27
    +4

    Id be aware that you may not be entitled to Centrelink payments straight off the bat with the cash in hand you have including a possible payout.

  • popsiee on 20/03/2020 - 08:33
    +1

    Looked at 1987 Black Monday , 2008 GFC and if you sold shares during the peak of the panic compared to riding them out to the recovery you will be much better off . Try to ride them out if you can .

    • boostpak on 20/03/2020 - 08:46
      -4

      can you explain this in detail of why riding it out pays long term

      • ESEMCE on 20/03/2020 - 09:20
        +6

        You don't lose anything until you sell (or the company goes bust). Most companies will recover and their Share Price will similarly recover.

      • Seraphin7 on 20/03/2020 - 09:47
        +6

        I recently posted that if you bought $100 worth of Aus equities at the market peak in 2007, they would have fallen to just about $50 at the bottom in 2009. Up until the recent crash, they had recovered to just about $200.

        As ever, no one can predict the future, but if we end up with a similar scenario here, those who ride out the downtimes will typically do better than those that panic sell when the market is low and then miss out on significant upside in the recovery.

        Taking the above example, if you panic sold at $50 and then waited until the market had gone back up by 50% before putting your $50 back in, your investment prior to the recent crash would be worth about $100, rather than $200 it would otherwise have been worth.

        • Gelato on 20/03/2020 - 11:00

          Don’t forget about inflation from 2007 to 2020

          • brad1-8tsi on 20/03/2020 - 14:13
            +2

            @Gelato: don't forget about dividends and franking credits…

      • ThithLord on 20/03/2020 - 09:54

        Probably means much better off than selling when the shares have been obliterated

      • EightImmortals on 20/03/2020 - 13:31
        -1

        I think he meant to say riding them out was have been preferable to selling when they hit their lowest?

    • mikzter on 21/03/2020 - 10:08

      I'm sure you've written that badly, it reads that if you sold shares you'd be better off. I get what you are saying but it's convoluted.

  • Melb69 on 20/03/2020 - 08:35
    +3

    Why can't you start looking for a new job? Maybe in another field. I wouldn't rely on the welfare system, as that will be struggling as it is. Hopefully the current situation will resolve itself in less than 6 to 12months.

  • [Deactivated] on 20/03/2020 - 08:58
    +2

    "Looking for advise on how to financially prepare for likely retrenchment as a single person."

    First step is to put a wife and kid picture on your desk. Seriously. Hire some.

    • holdenmg on 20/03/2020 - 09:16
      +2

      Airtasker? lol

    • Alley Cat on 20/03/2020 - 09:28

      Aren't kids expenses until idk, when you can train them to do stuff?

      • OzCheapo on 20/03/2020 - 10:22

        They're still expensive after that… Just ask my mother after raising my sibling and I.

        It took me til 23/24 - graduating university… before I was able to get out of the nest/coop and go full time.

        OP: Change all the important passwords :D You'll be indispensable but a complete skid mark.

        In seriousness, in my humble opinion, do your best to secure another position but in the worst case scenario, maximise your Centrelink entitlements. After all, you did pay tax for situations like this. While it isn't kosher to rort the system, it's the government's responsibility to prevent this, or rather the policymakers and lawyers they engage with our money. Besides if enough people find the flaw, they should be able to rectify this for future.

  • starspawn on 20/03/2020 - 09:47

    Start looking for a new job!

  • ssquid on 20/03/2020 - 09:48
    +7

    Not trying to be greedy, just want a big payout and dole from Centrelink even though you've got over $20,000 savings.

  • wannagrababargain on 20/03/2020 - 10:41
    +2

    If you do lose your job, the cash savings/termination cash you have in your hand will be what tides you over, so I would say don't put a cent more into the mortgage than your monthly repayments. Building up enough cash in your hand now means you'll be able to stretch out the repayments longer if you do lose your income source. Also if that unfortunately does happen you might be able to negotiate a temporary reduction of monthly repayments on the mortgage to stretch it out further. Credit is going to become cheaper and cheaper. It's all about making that cash go as far as possible to "bridge" you to your next source of income.

    Don't sell off assets like shares at a loss unless absolutely necessary.

  • CyberMurning on 20/03/2020 - 11:04
    +4

    dont browse ozb. this should be the tips number 1

  • trex on 20/03/2020 - 11:14
    +1

    Work out how much your monthly cash burn is and prepare about a year’s amount in cash to meet it.

  • netjock on 20/03/2020 - 12:13

    You will be fine. Since there isn't many deals posted on OzBargain. Just don't over stock on toilet paper, it will drain your $s and making you insolvent with $ but swimming in toilet paper liquidity.

  • sparkles on 20/03/2020 - 12:25
    +4

    Centrelink will probably ensure you whittle that $20K payout down to almost nothing before giving you anything. You might be better off getting a redraw facility and dropping the entire $20K onto the mortgage. Then technically in Centrelink's eyes you have no cash funds.

    Don't sell the shares until absolutely neccessary. Meantime, hope and pray that mortgage payment deferral becomes law.

    Consider though, it's not just you, pretty much everyone is stuffed. You've got some options, and at least you aren't staring down the barrel of a $500K mortgage.

  • tsunamisurfer on 20/03/2020 - 12:40
    +5

    Protect my financial assets from centerlink

    When I read that I read it as taxpayers of Australia need to be protected from you.

  • Meho2026 on 20/03/2020 - 12:42

    Centrelink wont count the equity in your own home as an asset to reduce your benefit but they will take your redundancy pay, savings and other assets into account.
    You'll probably have to spend most of your redundancy before you become entitled to benefit.

    If you have reduced your mortgage using an offset account then just top up your benefit with that until you are back on your feet.

    The banks are going to get financially hammered in this, large scale job losses and people not being able to afford their mortgage repayments is a part of that.
    The big banks are all working on an action plan. There is already in place payment deferral plans for people losing their jobs but there hopefully be more things put in place to alleviate the damage. It would be counterproductive for them to repossess properties.

    Just be mindful that you are actually in a much better position that a lot of people.
    Theres reports already of hospitality and major hotel chains in the Gold Coast slashing 60% of their staff and a real estate agent told me yesterday they are receiving calls from tenants who cant pay their rent right now. There is a huge casual workforce working for not much more than minimum wage, who are too young to have accumulated savings and property.

    • Extreme on 21/03/2020 - 08:45
      +1

      Offset accounts are considered to be “savings”, which may reduce or extend the period before he is entitled to receive welfare.

      In this situation, putting funds onto the loan and using it as redraw is the smartest move as it isn’t considered savings.

  • TheBilly on 20/03/2020 - 13:37

    I'm totally screwed on this. My form of preparation for retrenchment is acceptance. As long as I can accept loosing the job, house, car etc. It's all good.

  • Euphemistic on 20/03/2020 - 13:47

    Best solution is to get a new job ASAP. The retrenchment payment is meant to tide you over until your next job, not set you up financially, treat it as income for the next xxx weeks.

    Don’t sell the shares unless you have to.

    If you do get retrenched talk to your mortgage provider immediately to see how they can help out. They really don’t want to foreclose if they can avoid it.l and may be able to reduce or skip a few payments.

    Cut your spending as much as practical to save for the future.

  • brad1-8tsi on 20/03/2020 - 14:18

    Your emergency fund sounds low. Even your redundancy package sounds low but it's hard to say not knowing years of service, salary and EBA conditions.

    On the bright side, redundancy (eligable termination payment) is taxed much lower - 5% IIRC.

    Go to Centrelink. I recommend you act really dumb as they don'yt like helping people that can read and write and speak politely. They'll tell you to go away until your money is gone. If you have a partner that works they will tell you to go away for ever.

    Insist that they register you as unemployed.

  • Dont Care on 20/03/2020 - 14:31
    -1

    withdraw your $2k put under the bed. sell your shares, put money under the bed, withdraw your redundancy once you get it. Yes there will be a lag between your retrenchment and centrelink eligibility but when they ask for bank statements it will show 0 instead of $42,000.

  • Bargain80 on 20/03/2020 - 15:05

    I think the most high demand jobs in the next 6 months is in health sector.
    Although usually they demand high qualification but they probably will lower that a lot in this crisis.

    the next one is in grocery & fresh food area (e.g. Coles ditribution centre, or fruit picking in the farm)

    • Alley Cat on 20/03/2020 - 15:50

      I think the most high demand jobs in the next 6 months is in health sector.

      Taking into account of those who will fall ill in the sector due to exposure and overtime, the demand will be very high. Takes a few years to make that career change tho.

    • try2bhelpful on 20/03/2020 - 18:50

      I don’t think you need a really high level qualification for looking after old people, but that might be a shrinking market in the long term.

  • b1ackmai1er on 20/03/2020 - 18:54
    +1

    Hi all, thaks for the great feedback.

    i would be checking out (and posting to) r/AusFinance on reddit

    Perfect, thank you.

    Id be aware that you may not be entitled to Centrelink payments straight off the bat with the cash in hand you have including a possible payout

    That's what I was expecting. I'm not sure if a finacial advisor would be able to give be good advise around the workings of centerlink

    Looked at 1987 Black Monday , 2008 GFC and if you sold shares during the peak of the panic compared to riding them out to the recovery you will be much better off . Try to ride them out if you can .

    Yes that is what I have always elected to do in the past but if centerlink forced me to sell them, the proceeds would probably only last 6mths and then my safety net is gone and I still have to pay a morgage. Thinking better to cut my losses and at least minimize the morgage I have to pay.

    Why can't you start looking for a new job? Maybe in another field. I wouldn't rely on the welfare system, as that will be struggling as it is.

    Absolutely valid and I actually hadn't thought of that, I think fear took over and all I could think was "oh my god I'm going to lose everthing". I have no desire to rely on welfare but am happy to use it as a stepping stone in life.

    When I read that I read it as taxpayers of Australia need to be protected from you.

    On the whole, yes I a agree with. But in the long run, are Australian taxpayers better off with me living in poverty, no assets, can't afford to run a car, nothing to contribute to society, to fall over the finish line of a working life and relying on benefits 'till the day I die. Better they help me back on my feet, I think.

    Just be mindful that you are actually in a much better position that a lot of people

    Thank you, well said.

    I'm totally screwed on this. My form of preparation for retrenchment is acceptance. As long as I can accept loosing the job, house, car etc. It's all good.

    I'm sorry to hear that and niow just starting to realize that my post might have been a bit "tone deaf" to current situation out there.

    Cut your spending as much as practical to save for the future

    More can always be done but I already live a very frugal life. Don't even buy anything off ozbargain anymore. Never seen an enerloop thingy that everyone else has.

    Your emergency fund sounds low.

    Agree.

    On the bright side, redundancy (eligable termination payment) is taxed much lower - 5% IIRC.

    Thanks I did not know that.

    They'll tell you to go away until your money is gone

    I need to find out what "gone" means … there must be a scale or something.

    withdraw your $2k put under the bed. sell your shares, put money under the bed, withdraw your redundancy once you get it. Yes there will be a lag between your retrenchment and centrelink eligibility but when they ask for bank statements it will show 0 instead of $42,000.

    I hate it but I think this is pretty much what I should do. The world isn't a perfect place and no good deed goes unpunished.

    I think the most high demand jobs in the next 6 months is in health sector.

    Agreed but competing against much younger workforce.

    the next one is in grocery & fresh food area (e.g. Coles ditribution centre, or fruit picking in the farm)

    Disagree. Current food shortages are due to hording. There is no lack of food or produce and supply chain will quickly refill. Businesses will make sure this happens because this is boom time for them (until the lull)

    Thanks again and for not calling me a dole bludger etc. I love working, learning, working with people, contributing, making things better and the last thing I want is to be unemployed.

    Good luck to everyone else there.

  • tabitha731 on 21/03/2020 - 09:38
    +1

    Ive been in your shoes, you will not get a cent from Centrelink. Focus on long term investments, things will bounce back..it will just take a long time. Pay off as much of ur mortgage as possible, it takes a lot of strain off you, especially while rates are very low, take advantage of that.

    • jdawgz on 24/03/2020 - 10:48

      How long did it take before you started to get anything from Centrelink? Or did they give you nothing after you received your retrenchment/redundancy payment?

  • OzHunterNSW on 21/03/2020 - 11:55

    There are a lot of people without the assets you possess.

    If worse comes to worse, sell the lot.

  • kazoomyn on 21/03/2020 - 12:33

    Just go to their website?

    I went there and used the estimator with the basics of what you've described, pretty easy to use and it worked out the fortnightly rate

    https://www.centrelink.gov.au/custsite_pfe/pymtfinderest/pay…

    I'd assume a waiting period with shares, money in bank etc. Shows a sliding scale of how many weeks to wait depending on how much $$$ you've got here https://www.servicesaustralia.gov.au/individuals/topics/liqu…

  • MrBear on 21/03/2020 - 12:35

    If you are ahead on your mortgage payments, you may be able to stop paying whilst using that buffer that is paid for since you are ahead of schedule.

  • srhardy on 21/03/2020 - 14:09

    Is the EBA with the governement or Private? As the gov can print anything it owes but private companies will be in dire straights and declaring bankruptcy's and that will wipe out any payyout garantee.

    So assume thats $0

    2k in hand, ahead on house payments and single I take it no kids and what age and industry/skill set?

    Need more basic info.

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