The 5 most NB financial steps to take if you lose your job

Published on 25th May, 2023 at 02:32 pm

Losing your job unexpectedly is not only a blow to your confidence – but to your finances, too. Here are five steps you can take to future-proof your finances and bridge the gap between employment.

Reading time: 4 minutes

In this article you’ll learn:

• The immediate steps to take after an unexpected job loss.
• How to review your budget to rebalance your outgoing costs.
• The value of an emergency fund and preservation fund, and how to get started.

Market conditions globally are flat and everyone is feeling the pressure of rising costs. South Africa is no exception, with the World Economic Forum reporting that the country is expected to see the highest jobless rate globally. So, what do you do if you find yourself another unemployment stat?

Seek expert advice

It’s easy to panic when you lose your job, but Hazel Pretorius, Sanlam senior financial planner and principal of Sasolburg BlueStar, warns against making emotional decisions. Instead, speak with your financial planner to steer you through the turbulent financial waters. “Don’t be ashamed or embarrassed,” she says. “That’s what we’re here for – not just in the good times, but to help see you through the bad times, too.”

When you book a meeting with your financial planner through Sanlam Reality, you can earn 8 000 tier points!

In the case of retrenchment, many employers offer some sort of severance package, notes Pretorius. If this applies to you, as a first step, she suggests finding out the details of your severance package and other benefits. “Knowing what your payout will be will help you better plan your finances for the coming months,” she says.

Ever wondered whether you can contest a retrenchment? We found out from a legal expert.

Communicate with your financial service providers

Pretorius also suggests contacting all the institutions you have commitments with before defaulting on payments. “Most, especially banks and vehicle finance, require proof of a retrenchment benefit on signature of a contract, so it’s important that you make the necessary arrangements to have those benefits paid to you, [if you are being retrenched],” she explains.

Some employers won’t have these benefits in the case of a retrenchment, or you may have lost your income in a scenario unrelated to retrenchment, in which case you need to negotiate minimum or no payment for a certain period. “Be honest about your situation so that expectations can be managed and both parties are satisfied with the arrangement,” says Pretorius.

Revise your budget

A change in income requires a change in spending habits. The best place to start is by reviewing your fixed-cost items – think bond repayments and medical aid. “All responsibilities where reduced payment or temporary payment suspension cannot be negotiated is where you need to focus your attention first,” explains Pretorius. From there, identify your flexible costs. “Look at items in your budget that you need, but that you can reduce the cost of through simple lifestyle changes,” says Pretorius. For instance, groceries, electricity, water and transport costs can all be reduced with careful planning.

The merits of an emergency fund – and how to build one

“The best lesson we could have learnt from the pandemic is the importance of an emergency fund,” says Pretorius, adding that you should have enough money in your emergency fund to cover at least three to six months’ worth of living expenses.

If you don’t have a fund, prioritise this when you are employed again. Open a separate savings account and set up a debit order to have a small amount transferred into this account each month.

The value of a preservation fund

It’s very tempting to dip into your retirement savings to tide you over, but Pretorius warns against this. “Using your retirement savings to help you survive temporarily will impact your plans later,” she explains. More about this, here. Instead, she discusses the value of having the funds transferred to a preservation such as the Sanlam Cumulus Echo Preserver to preserve them until they can be used for their intended purpose. “The fund allows you to ‘park’ the fund value accumulated at your employer to continue to grow until your retirement,” she explains.

The Sanlam ​​​​​​​Cumulus Echo Preserver is a preservation fund offered by Sanlam that is also a Wealth Bonus participating product. When you take out a Sanlam Cumulus Echo Preserver, you can earn Wealth Bonus, Sanlam Group’s monetary reward for long-term wealth. Because it’s a participating Wealth Bonus product, every time you contribute towards it, Sanlam contributes to your Wealth Bonus, which eventually unlocks at certain milestones and pays out in cash. Find out more here.