During tough times it’s not only consumers who feel the pinch but companies too and to stay afloat businesses often look at ways to reduce their operating costs. This normally results in the retrenchment of a number of employees.
Retrenchment can happen at any time and can often blindside the employee which can have a big impact on your financial situation. You’ve been told you’ll have to leave your place of work and find starting from the beginning somewhere else in a short space of time, this can also affect you psychologically as well as within your household.
Seeing as this isn’t something many people think of when they sign a contract with a company many people struggle when they are retrenched.
It is a good idea to be prepared for the worst case scenario, to ensure that you can survive financially should you be retrenched.If you or someone you know has been retrenched, here are some tips to help you manage your new financial situation.
1. Contact your creditors immediately
The moment that you have been retrenched, you should contact your creditors to inform them about your change in the situation. Let them know the details about your retrenchment as this will have an impact on your ability to pay back your loans.
2. Check to see if you have retrenchment cover
This may take the shape of credit life insurance or another policy, which will assist in covering the cost of your debt while you are unemployed. Generally, retrenchment insurance products will pay out for up to six months after you have been retrenched. If you’re in a high volatile company with high staff turn over it may be wise to take out personal retrenchment cover with a credit provider of choice.
3. Claim on credit life insurance
If you have taken out a long or short term loan, chances are that you have credit life insurance. Many people are not aware that all unsecured loans come with credit life insurance. This is to cover the value of the debt you owe should you pass away, or assist in paying off your debt if you are retrenched.
If you happen to lose your job due to retrenchment, then the policy will pay you out for up to six months, to help cover your loan repayments. However, each policy is different in the amount it will pay out, and you should check with your credit provider as to the terms of the cover.
This will give you some breathing space as your major repayments are covered for a short period of time.
4. Claim UIF
If you contributed towards UIF while you were working (this will appear as a deduction on your payslip), you are entitled to claim unemployment should you be retrenched.
5. Manage your finances
It is important to have a budget no matter your financial situation, however, it becomes more important if you are retrenched. Sit down with your family and discuss your financial situation. Draw up a list of expenses that you can cut-out, and areas where you can cut-back.
It is important that the entire family understands that money may be tight and you may have to do without certain luxuries.
If you need advice on how to reduce your spending you may find the following helpful:
6. Change your bank account
If you have a bundled bank account, it gives you the benefit of a number of transactions and services included in the monthly service fee, however, this can be costly. To save money on your banking when you are retrenched, change to a pay-as-you-transact account, where you only pay for the transactions you make, and not services that you don’t make use of and do not need.
7. Identify Your Crisis Point on a Calendar
Do not rush out and grab the first job you find. Muscling aside a matriculant so you can serve pizza is not constructive for you or the person whose job you’re taking. Instead, plan a budget and determine how much time you have to job hunt.
A general rule of thumb is the “crisis point” should be where your existing savings dip below 50%. For example:
I have R100 000 in savings, and my crisis point is R50 000.
8. Get What You’re Owed
Iron out your time sheet with HR. Make sure you collect on all the expenses like data, internet, petrol, calls and overtime pays. Don’t forget the little things like seasonal parking; some companies have policies that will compensate you. If you work a sales job, make a final check that our commission is in order. Get any questions answered in writing, while you’re still a presence in the office.
9. Generate a new form of income
While you’re getting your CV together and begining your job search theres no reason why those days at home should not bring you in any income. Time is money and there are many ways to earn a part time income while you wait for a full time job.
If you need ideas check out our post – I Need Money In South Africa: 6 Tips That Work
10. Put your CV together
You may want to go home, curl up underneath a blanket, eat a tub of ice cream and cry and once that phase is over its time to take action. What you should do as soon as you get home is taken out your laptop and start working on your CV.
You probably haven’t updated it since you were last looking for a job and have since acquired more experience and learned new skills. You should also take a look at your Linkedin profile and see whether it’s as impressive as it can be. Add articles you’ve written, courses you’ve taken and anything else you think could benefit you in your job search.
Then register on various job portals like Indeed, Pnet, Careers24 and Bizcommunity.
Manage your debt effectively
If you still need help with your savings and you’re feeling overwhelmed by your current financial situation, feel free to contact us. To Speak to one our consultants about debt review contact us here.