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83 - Here’s a financial game plan to relieve the stress after retrenchment

Question: I have just been retrenched and am having sleepless nights worrying about my personal finances. Do you have any advice?

Answer: I helped many people deal with retrenchment during lockdown and found that, Once we worked out a financial game plan for the following six months, the stress levels dropped and they could concentrate on re-establishing their careers.

Because you do not know how long it will take to get another job, you need to manage your money to ensure that it will last as long as possible. To do this, you need to reduce the outflow of money from your household. 

Draw up a monthly budget of what you are currently spending, go through it and decide what is essential. Cut out the rest till your finances improve. Remember, this is just a temporary situation. 

Next, look at possible sources of income. If you have contributed to the UIF, you will be entitled to monthly UIF payments. 

Your severance package must be used to fill any gaps that you have identified. If you divide your severance package by your reduced monthly budget, you will know how many months you have before your money will run out. 

My recommendation is to try to put six months’ worth of your gap amount into a savings or money market account. If you have an access bond and the discipline not to draw more than your gap, then this would be ideal. The aim is to tide you over while you are getting your work life sorted. 

Retirement funds

Another lump sum you will receive is the contributions you and your employer made to your retirement fund.

My recommendation is to put the entire amount into a preservation fund and not to be tempted to make a withdrawal to clear debt or go on a holiday.  

Insider tip

You are only allowed to make one withdrawal from your preservation fund so do not make any initial withdrawals when you transfer your funds as this will count as your withdrawal.  

Risk cover

If your company has a retirement fund, there is a very good chance that the fund had life and disability benefits. In many instances, these benefits have what’s called continuous assurance options. These allow you to take out an individual life policy with the same benefits but with no medicals. 

If you have health issues, I recommend that you ask your financial adviser to find out if this is available to you. As you will be losing any group cover, you need to ensure that you have sufficient private cover. 

You will need to act quickly as most retirement funds give you one month in which to exercise this option.  

Medical aid

It is important that you remain a member of your medical aid. If you have a break in cover of more than 90 days, you will find yourself having exclusions and a waiting period will be applied. Opt in to a lower level of cover rather than cancelling your cover.