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Getting to grips with the financial reality of retrenchment can be daunting, but looking at your options – especially when it comes to your retirement savings and investments – is an important step to taking charge of your finances. Sherwin Govender, Business Development Manager at Glacier by Sanlam, offers some tips to help you (financially) survive this stressful time.

Retrenchment tip #1: Don’t take it personally

It’s easy to take retrenchment personally. You’re a loyal human and dedicated much of your time and energy to your job. The reality is that it’s not your fault. You didn’t do anything wrong. Your company probably came to a point where they needed to make a financial decision for its future existence. Retrenchment is the least favourable practice and last line of defense in business, but is often unavoidable. The sooner you come to terms with this, the sooner you can move on to the new possibilities that await you.

Retrenchment tip #2: Appoint a financial planner

This truly is the best time to get a financial planner. There are some big, important financial decisions to be made and a qualified financial planner can help you make them with confidence. For example, if you’ve been working for the same company for a number of years, you probably have built up a sizeable pension fund. There are some investment decisions you need to make about the future of this money. You don’t want to make any mistakes!

Getting advice from a financial planner experienced in retrenchments becomes invaluable. Book a meeting.

Retrenchment tip #3: Cut your household budget

The reality of retrenchment is that bills will continue to reach you while your regular monthly salary won’t. Now is the time to go through your monthly household budget with a fine-tooth comb. You need to be strict about the unavoidable expenses (for example your bond repayment or your kids’ school fees) and those expenses that are luxuries and can be suspended until you have a regular income again.

Retrenchment tip #4: Calculate how you will live until you start earning again

If you are worried about covering your living expenses, find out the following before you touch your retirement savings:

  • What retrenchment or severance package is your company offering you? Your employment contract should include this information.
  • How long will the retrenchment package last? Consider your monthly living expenses and where you can cut unnecessary spending.
  • What other savings or investments do you have access to? It’s not ideal to dip into any investments, but in emergencies your savings (other than your pension fund) can tide you over until you start earning again.

Retrenchment tip #5: Speak up

Don’t be embarrassed to ask for better interest rates, reduced instalments on your accounts, or even payment holidays. Whatever you do, don’t ignore your debt obligations. If you are struggling to keep up your debt payments, a conversation with the credit manager at your bank or a debt counsellor will go a long way in preventing judgements and poor credit records. Remember, your credit record is considered when you apply for a job, so you want to keep it as clean as possible.

“Don’t be embarrassed to ask for better interest rates, reduced instalments on your accounts, or even payment holidays. Whatever you do, don’t ignore your debt obligations," says Sherwin Govender, Business Development Manager at Glacier by Sanlam.

Retrenchment tip #6: Check if you have retrenchment cover

Check the cover on your credit card or retail store accounts. Perhaps there is built-in retrenchment cover you didn’t know about, included in your service fees. If you have a policy that covers retrenchment specifically, good for you. It could help ease your financial burden.

Retrenchment tip #7: Stay away from your existing retirement savings

Cashing in 100% of your pension fund can be the most financially damaging decision you can make when you’re retrenched. Your retirement savings are your money for the future. It may be tempting to cash it all in and treat your pension fund as though you’ve just won the Lotto, but don’t forget why you have this money saved up in the first place. If you cash in the entire pot, you’re robbing yourself at age 60 – it’s that simple. Before you cash in even a portion of the fund, find out how much tax you’ll have to pay on that money. That should be reason enough for you to keep your pension fund invested.

Retrenchment tip #8: Consider transferring your pension fund into a preservation fund

As the name suggests, preservation funds protect your pension money. You can withdraw it later, but the longer it stays there, the better. Together with your financial planner, you can decide how the money is invested.

Retrenchment tip #9: Overhaul your CV and get it out there

This may seem obvious, but looking for a new job takes time. Ask the HR specialist handling your retrenchment about the possibility of redeployment. Often in big organisations there may be opportunities in other divisions – just be open to the possibility that you may need to take a pay cut in a new role.

Don’t be disheartened when you don’t get invited for an interview for jobs you’ve applied for.

Review your CV and tailor it to advertised jobs, highlighting the skills and experience you have that fit the job spec. This doesn’t mean being dishonest about your skills or experience; remember, lying about your qualifications is a criminal offence.

Retrenchment tip #10: Reinvent yourself and your career, but…

…within reason. If you’re thinking of starting a new business venture, be realistic about the projects and business ideas that you get tempted into. A new business – or even buying an existing one that looks profitable on paper – can drain you financially. Develop a comprehensive business plan and get a reputable business consultancy or your business banker to vet the details. Now is not the time to take uncalculated risks.

A qualified financial planner can offer invaluable advice when it comes to securing your financial future during uncertain times, such as unemployment as a result of retrenchment. Book a meeting today to discuss your options. Glacier Financial Solutions (Pty) Ltd and Sanlam Life Insurance Ltd are licensed financial services providers.

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