What if you got retrenched/incapacitated today?

A few years ago I worked as a supervisor for a local cleaning company. I had gotten comfortable in my role. But, as a holder of a banking degree from my home country, I had been hoping I would grow within the company. I had started studying towards an Accounting degree, with the hope of qualifying as a CA (SA). So, I started to see myself working in the finance department at the head office. I had good relations with my direct manager and so I hoped this would work in my favour.

However, one fateful day, I got to office to find a retrenchment letter at my desk.  I had a few weeks to clear my desk, find new work and move on. I did not have any savings or anything to fall back on. My mother was critically ill. I was still studying. I had to send all the money that I had back home to assist with the medication for my mother.

So here is the question: If you got retrenched today or if you got injured and can’t work anymore, are you ready for the life that follows? What if you are also in debt?

I wasn’t ready. So I learned a few lessons and they’re a few things that I think are very important:

  • Have a budget and try to live by your budget as much as you can. Leave no room for impulsive buying. Learn to say NO to your self.
  • Develop a culture of saving. Eliminate unnecessary spending from your budget and apply the saved money towards your savings.
  • Have an emergency fund with at least three months of your living expenses. Do not put the funds in a fixed deposit account (For example, I know Capitec bank allows you to open a savings account linked to your salary account and you can access your funds without giving a notice to the bank)
  • Take out an income/salary protection cover. Depending on your circumstances, you can get one from as little as R139 a month. This is invaluable because it offers you income/salary protection if you become severely ill, injured or disabled and are no longer able to perform the duties of your employment.
  • Take out a disability or critical illness cover.

What to do if you got retrenched: 

  • The first point of call would be to review your budget and reorganise your finances to suit your current situation. See if they any expenses that you need to cut off.
  • Contact your creditors and inform them of your situation. A loss of income could mean you are now unable to service your debt. This will affect your credit profile. The aim in contacting your creditors is to see if you they can agree to a repayment plan. Many creditors will under certain circumstances suspend payments for three months, especially to bond holders because they own the underlying asset. If you have a retrenchment cover, apply part of this to settle your debts.
  • Cease using your credit card to fund your life expense or your expensive tastes.
  • Investigate if your debts have built-in insurance covers, so that these can be written off.
  • Claim UIF – if you contributed, you must claim within six months of being retrenched.
  • Reduce your bank costs – consider your bank fees and what drives them. Try to use channels that will minimise your banking costs. For example, a cash ATM withdrawal might be more expensive than a point of sale swipe. If you must draw cash, do it at less expensive channels that your bank offers other than ATMs.
  • Lastly, update your CV. Let your network know that you are officially unemployed and searching. Be prepared for interviews. Always have some travelling money. Try to negotiate for phone or Skype interviews.

You have heard them say, “there are two certainties in life, death and taxes” but be warned if you are not prepared loss of income will become a certainty for you as well.

I hope this helps and triggers your mind to start thinking about protecting your income and your income earning potentials.

Declaimed:  I am not a financial advisor. Should you need a finance advisor I am more than happy to recommend some firms or people I know who can help you to put your house in order.

http://evafinancialsolutions.co.za/

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