I've just lost my job!

If the Spending Review cuts are going to affect you, find out how to keep your head above water...

The Government has announced its Comprehensive Spending Review and the media have scrambled to give the big picture on how the cuts outlined in the review will affect the UK’s economy.

But what if you’re a civil servant who’s just found out that your job is being cut? What should you do straight away to ensure your debts don’t become a mini financial crisis?

The accountancy firm PwC recently estimated that the spending cuts would result in 943,000 job losses over the next five years, not only in the public sector but also in the private sector as the cuts’ knock-on effects hit public/private partnerships, suppliers and associated businesses.

For example, cancelling a previously green-lighted plan to build a hospital can mean unemployed or underemployed construction workers, cleaning staff, hygiene/medical equipment suppliers and more; all private sector staff working in a public sector environment. It’s not just a case of less nursing jobs.

And even though the PwC report cautions that labour market flexibility could reduce the amount of redundancies, that doesn’t always help people in reality. Working fewer hours means less pay and previously manageable bills still become harder to afford.

Every one of the estimated 943,000 people facing possible redundancy will need to refocus their spending habits and rein in costs so that they, and their families, can survive the storm. That means budgeting effectively and finding how to pay the bills without falling into the trap of unmanageable debt.

Do your own Spending Review

When your level of income becomes a worry and debt becomes unmanageable, the first thing you need to do is to categorise your debts into three areas – priority, essential and non-priority – and do a budget. All three require different actions to ensure you keep your head above water.

Priority creditors

Always pay your priority bills first – you need a roof over your head, heating, water, electricity and even a humble TV licence – and if you’re having problems with these payments then talk to someone, and fast. You need to pay the mortgage and ensure that any costs enforceable by law are paid.

And while you can definitely scale back on the amount of energy you use you can’t eliminate these costs entirely.

Next step: Talk to these creditors as soon as possible and explain your situation. Don’t be embarrassed as during the current downturn you’re definitely not alone.

Essential costs

Food, prescriptions, car servicing costs, clothing and footwear (among others) are classed as “essential” - you need to eat! But you need find ways to reduce food costs and the amount you spend on items as diverse as clothes, glasses or entertainment (do you need that Sky package?).

Next step: Follow the tips here on lovemoney.com to save money, especially Frugal Food.

Non-priority creditors

Credit/store cards and unsecured loans with regular monthly payments are classed as “non-priority” creditors. We spent too much during the boom years when credit was easily available and now we’re left with the bill.

But that doesn’t mean they won’t want their money back, so if a sudden change in your finance circumstances means you simply can’t pay these bills then get in touch with us quickly.

Next step: Visit the CCCS website or phone us on 0800 138 1111. We can help you compile a full budget, give you free, impartial and realistic advice and assist you in overcoming any financial difficulties.

Waving not drowning

There are many more costs that fall under these three categories, but if you’re having problems with non-priority creditors, or you think that redundancy will tip your debts into the “unmanageable” category, then use CCCS DebtRemedy, our online debt counselling service. It’s available 24 hours a day and helps you categorise the priority, essential and non-priority debts straight away.

The financial storm is upon us. If you’re one of the unlucky ones whose job falls to the cuts it doesn’t mean the end. If you’re focused on your debts and get help quickly you should emerge on the other side a bit battered and beaten, but still afloat.