How can I manage a gap in my earnings?
In an ideal world, the transition from one job to the next will quick and without a loss of income. Unfortunately the reality is often very different.
Even if the decision to move on was yours, the case may be that your old employer paid you in advance but, your new employer requires you to work a month in arrears. If it was not your decision, you may find yourself out of work for a few weeks or even months while you wait for the next opportunity to come your way.
So how do you keep control of this temporary lack of income and without jeopardising your financial responsibilities?
Keep a budget
Working for a whole month without any pay does not have to be as daunting as you may at first think. Creating a budget enables you to stretch your final pay check further and prioritise your essential outgoings
Reduce your spending where possible by cutting down on discretionary items such as eating out or other entertainment, at least until your new salary hits your bank account.
Try and use cash whenever possible – it's much easier to control what you're spending when you have to keep going to the cash point every couple of days. You may want to take out a sum of money to last you the week any try to stick rigidly to that amount.
Balance your books
Always pay your most important bills first. Mortgage or rent, utilities, transport and food shopping are usually your main priorities – anything after that can be considered a luxury.
Consider changing your bank account to one that offers an interest-free overdraft facility. Many credit companies offer protection schemes for when you're out of work so take a look at the options available to you.
If you have any personal loans, credit cards or a hire purchase agreement for your car then you want to consider contacting your creditors to negotiate lower payments or interest-free payments.
Don't wait until you're behind on your payments or your creditors may be less flexible and your credit file will be marked if you miss a repayment.
If you have any debts you can call in, now's the time - remember the £20 you lent your friend in the pub a couple of weeks ago?
Hide away money
If you are lucky enough to receive a large payment as part of a redundancy package, it can be tempting to blow this money on holidays and leisure activities to keep your spirits up after what is usually a traumatic time.
It pays to keep a cool head in these circumstances and treat the money no differently from your usual salary. Invest the lump sum into a savings account and ‘pay' yourself monthly until you have found a new job. When your next real salary comes in, that's the time to treat yourself.
If you're really struggling for cash, it may be worth considering a pawnshop. You can take in items you own and leave them with the pawnbroker in exchange for an agreed amount of money. When you're finances are back on track, you can return to the pawnbroker and claim back your item for the same value, with a little interest added on top. Be careful not to pawn anything you can't afford to lose if your pay lull lasts linger than expected.
Managing a pay lull is not as difficult as you may think. By calculating your monthly outgoings and sticking to a budget for the next four or more weeks, you may find that you are more comfortable than you think.