Redundancy-Proofing Your Finances

This article represents a personal view and is not financial advice. Statutory redundancy rules and rates change, so check current government guidance for figures that apply to your situation.

"Three to six months of expenses" is the standard emergency fund advice, repeated so often it's rarely questioned. For a single person renting with no dependents, it's a reasonable rule of thumb. For a household with a mortgage, perhaps childcare costs on top, and one income carrying more of the load than the other, it's frequently not enough, and the only way to know your real number is to actually model it.

The Salary Isn't the Only Thing You Lose

The obvious loss in redundancy is the monthly salary. The less obvious losses are the employer pension contributions that stop alongside it, any life insurance or income protection provided through work rather than held personally, and sometimes health cover for the whole family. Add these up and the true monthly gap is usually larger than the payslip number alone suggests.

What Statutory Redundancy Pay Actually Gives You

If you're eligible, statutory redundancy pay is calculated from age, length of service, and weekly pay up to a government-set cap, and it can provide a genuinely useful cushion. It's rarely a full replacement, though, for lost income over an extended job search, especially for shorter-tenure employees or higher earners whose pay well exceeds the statutory cap. Many employers offer more than the statutory minimum, so it's worth understanding your specific contract rather than assuming the statutory floor is what you'd receive.

The Number That Actually Matters: Your Monthly Burn Rate

Generic multiples of expenses only take you so far. The number that actually matters is your household's true monthly outgoing if one income stopped tomorrow (mortgage or rent, all bills, childcare, food, minimum debt repayments), set against any redundancy payout, savings, and the other partner's income if there is one. That gives you a real number of months of runway, not a rule-of-thumb guess.

• Calculate true fixed monthly outgoings, not a rough guess but the actual mortgage, bills, and childcare total.
• Add any statutory or contractual redundancy pay you'd actually be entitled to, not an assumed figure.
• Subtract what the remaining income (if any) already covers, so you're left with the true monthly gap.
• Divide your accessible savings by that gap to get real months of runway, which is very often a different number to "three to six months of expenses."

To make that concrete, here's a demo household modelled with its employment income stopped entirely, the main earner made redundant and no second income bridging the gap, while the mortgage, bills, and existing debts carry on. The household lives off the cash it already holds, roughly £70,000 across its current account and savings, and pauses discretionary saving, as most would. This is the running cash balance the forecast produces:

How Concentrated Is the Income You'd Be Losing?

Notice what does the most work in that chart: a surviving income. Everything above treats losing an income as an event of fixed size and asks how long you could absorb it, but the size of the event depends on how concentrated your income was to begin with. A household where one salary covers the mortgage on its own is far more fragile than a household with the same total income split across two earners, because one redundancy removes most of the cover rather than part of it. And two salaries can be less diversified than they look: if both of you work for the same employer, or in the same sector facing the same downturn, one bad year can take both incomes at once.

Concentration can be reduced gradually while you're still employed. Freelance or contract work in the skills you already sell to your employer is the most common route, and part-time or seasonal work is another. A spare room can produce lodger income, and the government's Rent a Room scheme lets you receive a set amount of that tax-free each year (check current guidance for the threshold). Interest and investment income count too, though they only become a meaningful monthly amount once the underlying savings are substantial. The honest caveat is that almost every secondary income starts small and takes time to grow, so it complements the cash buffer rather than replacing it. What it does immediately is shrink the monthly gap from the burn-rate exercise above, and a smaller gap stretches the same savings over more months.

Employability is a form of diversification as well, even if it never appears on a payslip. Current skills, warm professional contacts, and a CV that doesn't need three weekends of archaeology before you can send it all shorten the time between jobs. The arithmetic is the same as building a bigger buffer: a gap of three months costs half what a gap of six months does, so anything that shortens the search protects your runway just as surely as anything that funds it.

The chart above is the severe case, every income gone. The more common one is losing a single salary out of two, and that is a different shape of damage worth seeing on its own. Here is the same demo household with the second earner's income taken to zero and nothing else touched, held against the unchanged baseline across all three statements:

Stress-Testing, Not Just Saving

Building an emergency fund is only half the exercise. The other half is knowing, in advance, what actually happens to your household if the income stops: which bills bite first, how many months you genuinely have, and what decisions you'd need to make and when.

Once the runway you want is a number rather than a rule of thumb, getting there becomes a straightforward saving question. The savings goal calculator turns a target buffer and a date into the monthly amount it takes to build it.

In CrestCast you can duplicate your household as a scenario, zero out one income, and watch your cashflow and net worth play out month by month exactly as they would in reality, turning a vague worry into a concrete, actionable number.