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How to manage your investments if you lose your job

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By Nick Michaels - February 14, 2016

[Estimated time to read: 3.5 minutes]

Job security is currently a big concern.

Oil workers and those with jobs linked to the sector are understandably worried.

Only this week, BP announced plans to axe a further 7,000 jobs after announcing the biggest annual loss in its history.

But what should you do with your investments if you do lose your job?

This was a question posed by one of our clients.Lose_my_job.jpeg

It’s a hard question to answer generically, but we believe it’s such an important issue at the moment, that it’s worth offering some guidance.

In a sense, the question lands in the middle of the answer. Before you ask what to do with your investments, you need to re-assess where they sit within your overall wealth.

We believe that making an informed decision about what to do with your investments in the case of redundancy is a three step process…

Step 1 – Conduct a “personal risk assessment”

You need to be realistic about your situation. Ask yourself:

  • How long do I expect it to take me to find work again? Will I need to relocate or even retrain?
  • Do I have involuntary redundancy insurance and how long will it pay out for (these policies are often limited to 12 months)?
  • What are my expenditures? This must be a full and honest list. It’s also worth looking at what you can cut out at this point if possible and if necessary.
  • What emergency funds and liquid assets do I have? Don’t include your investments at this stage. Just focus on cash and any other savings, including any redundancy package.
  • How long can I live on my current liquid assets?
  • Are my liquid assets safe? Consider currency here and the strength of the institution holding them. 

Step 2 – Assess your investment portfolio

It may be that, having conducted step one, you believe your financial situation is currently relatively secure.

Despite your having been made redundant, re-employment prospects are good and you are able to cover expenses in the meantime. In this case, it is unlikely you need to take any action with regards to your investment portfolio, especially if the portfolio is for a long term goal such as retirement.

However, if having conducted step one you find you are at risk of coming into financial difficulty in the foreseeable future, it may be worth taking some action with regards to your investment portfolio.

Here are 5 things to consider:

  • Are there any realisable profits? Have any funds delivered a return which you could sell to produce cash?
  • Is it worth considering selling the whole fund if cash is now needed?
  • Are any of your investments income producing? Could receiving this income help get you through this challenging time (note that by taking income, the capital worth of an investment will grow more slowly).
  • Could you “de-risk” your portfolio, without causing a substantial loss to its value? It may be that some higher risk assets are no longer suitable given your situation.
  • Can you reduce costs? Transferring into a passive fund could give a real boost to returns

Step 3 – Regularly re-assess

Under these circumstances it is worth regularly re-assessing the situation.

Is it taking you longer to find work than you hoped? Are your expenses higher than you thought? Is your cash still safe? Are there more profits to be taken from your portfolio or does it need further de-risking?

Being made redundant can be one of the most testing times in anyone’s life. However, if you are able to objectively assess your situation and build a plan, it can help make it a bit more bearable.

Get in touch with a financial adviser – a dispassionate, third-party view is going to be critical. Losing your job is extremely stressful, emotional and frightening. It can, of course, also be liberating – and it's important to make sure that your decision-making at a time like this is cool and ordered. 

Doing something based on fear is not likely to be well considered, or to be the right decision in the long run.