The first steps to take if you lost your job tomorrow

Whether you're a contractor, freelancer, or a permanent employee, there's a chance that work could unexpectedly dry up. The Financial Conduct Authority says that 25% of UK adults could quickly find themselves in difficulty if they faced a financial shock, like being made redundant. The financial watchdog also says almost 8 million Brits struggle to keep up with their bills.

If your cashflow takes a sudden downturn, here are some useful steps you could take.

What are the chances of losing your job?

Official figures from the Office for National Statistics show the UK’s redundancy rate rose from 2.7 employees per 1,000 people in the three months from December 2021 to February 2022, up to 3.5 in the three months from October 2022 to December 2022.

Nevertheless, this is still lower than pre-pandemic levels. In fact, many companies report they're having trouble recruiting, and the number of job vacancies stands at around 1,083,000. So, if you do lose your job, hopefully it won’t be too long before you're back in work.

Redundancy can be scary. But some people might see this time as an opportunity to go freelance, transition existing skills to a new sector or start a business doing something they're passionate about.

If you lost your job tomorrow or were asked to cut your hours, which bills or debts should you prioritise if you'd struggle to make ends meet?

Top priority: pay your rent or mortgage

Mortgage arrears are a priority debt. This means you need to pay them before debts like credit cards, overdrafts or loans.

Whether renting or paying a mortgage, your first step should be to contact your landlord or lender. You might be able to work through a solution that may stop you from losing your home.

If you don’t take this first step, your landlord may try to evict you via 'seeking possession'. However, they can’t legally make you leave your home without going to court first, says Citizens Advice.

Should you end up in court, you may get a county court judgment (CCJ) against you. This will affect your credit rating and ability to borrow at competitive rates – or at all.

If you can’t meet your mortgage repayments, you might want to consider taking in a lodger, once approved by your lender, to bring in some cash and help reduce the arrears.

Other priorities based on your circumstances could include:

1. Child maintenance payments

If you have child maintenance payments, you should make them a priority, because the Child Maintenance Service (Opens in new window) can take the money directly from your wages or bank account without permission from the courts. It can also initiate a liability order (Opens in new window)

2. Council tax

Get in touch with your local council to discuss payment options. You want to avoid being taken to court, having money deducted from your pay, or having a bailiff arrive at your house.

• You can ask to spread your payments over 12 months instead of 10
• Your council may give you a one-off discount
• Check if you’re eligible for a Council Tax Reduction (Opens in new window) if you’re on a low income or get benefits, or a reduced council tax bill (Opens in new window) if you live on your own

3. Energy bills

If you can't keep up with your electricity and gas bills, don't suffer in silence. Get in touch with your provider – they should be able to work with you to agree upon a payment plan that suits you both.

If you can't meet these repayments, you might be switched to a prepayment meter, which means you have to pay for energy use in advance.

There are other solutions, too, like grants and government support (Opens in new window)

What to do if you can’t afford to pay

If you're struggling with priority debts, speak to your lender or creditor as a first resort.Think very carefully before being tempted by quick cash injections from payday lenders or worse, unauthorised lenders, such as loan sharks.

The following organisations and charities are good to turn to:

• Citizens Advice (Opens in new window)
• StepChange (Opens in new window)
• National Debtline (Opens in new window)
• Turn2us (Opens in new window)