In the second of a three-part series, Duane Naicker, Head of SURF (Sygnia Umbrella Retirement Funds), covers what to do to safeguard yourself financially if you’re one of the 2.2 million-plus South Africans who’ve lost their job as a result of the pandemic.
In the second of a three-part series, Duane Naicker, Head of SURF (Sygnia Umbrella Retirement Funds), covers what to do to safeguard yourself financially if you’re one of the 2.2 million-plus South Africans who’ve lost their job as a result of the pandemic.
In Covid-19 and Retrenchment: What You’re Owed I covered what South Africans are entitled to from their employer if facing retrenchment.
If you’ve finalised the retrenchment process, you may now be grappling with the emotional and psychological stresses of being jobless during a pandemic and the festive season (which will not be as joyous this year). While these issues may be beyond your immediate control, there are a few concrete “to-dos” to add to your list in order to manage finances wisely and, hopefully, provide yourself with a cushion to soften the financial blow.
Budget, budget and then budget some more
It seems obvious but budgeting really is the foundation of any solid financial recovery strategy.
Start by stripping away any unnecessary expenses (do you really need that gym
contract now that you’re not hitting the treadmill after work every day?) and
creating a new budget that excludes work-related costs that have fallen away,
such as daily transport, parking and that caffeine boost before work.
You may even feel some relief if the figures show you’re spending less and can put what you’re saving into an emergency fund. Remember: compound interest is your best friend – even a tiny bit more saved each month can help your money babies have more money babies of their own.
Start – or add to – an emergency fund
I realise that many people who are retrenched are stressed about how they’re going to pay the bills, but your severance package should provide a buffer for
a month or two. This leaves you with some leeway to either start an emergency
fund (even if you only use the work expenses savings mentioned above), or to
add to an emergency fund you’ve been sitting on.
Having a fallback will take some of the pressure off until you find new employment.
Sign up for UIF
If Unemployment Insurance Fund (UIF) contributions were deducted from your salary while you were working (appearing as a deduction on your payslip), you are entitled to claim UIF when retrenched.
You must lodge a UIF claim within six months from the date you stop working. You
will be required to:
•Register for UIF by completing a registration form.
•Provide a copy of your South African identity document.
•Provide copies of your last six pay slips.
•Provide a confirmation of employment or certificate of service from your former
employer
•Provide a UI-19 form completed and signed by your former employer.
When you’ve gathered all the required documents, visit the local Labour Centre and ask to sign the unemployment register. The Department of Labour will take around eight weeks to get back to you, and you will have to sign the unemployment register every four weeks to show that you still need UIF benefits.
Alternatively, visit www.ufiling.co.za and follow the steps to register. This is a free service that allows UIF returns to be done simply and conveniently online.
And please don’t write off UIF because “it’s so little, it’s not worth the effort”. Not only are you entitled to this benefit, but every Rand from UIF helps if properly used/invested.
Negotiate with financial institutions
The legendary Mark Twain said of procrastination: “Never put off till tomorrow what may be done day after tomorrow just as well.”
Great in theory, but in practice it’s human nature to procrastinate – who hasn’t stuck their head in the sand when overwhelmed by stressful situations? So I can absolutely understand why, when those red “overdue” notices stack up, people are inclined to leave the envelopes unopened.
I get it, but when it comes to debt you need to overcome this natural inclination and “adult proper”, because the more proactive you are the better off you’ll be.
If you think you may run into difficulty paying some of your short-term loans (like personal loans and motor vehicle financing) and/or long-term loans (like your home loan), take the bull by the proverbial horns and contact the financial institution.
You’re likely to be surprised by how ready they are to help, because it’s really not in the bank’s interest to repossess your home, or to close in on distressed loans. Some of the options to discuss include:
• A payment holiday: a period granted by the financial institution that allows you to skip monthly repayments entirely or to make partial payment.
• An extended repayment plan: the term of your loan may be extended so that the
monthly repayment is reduced to a more affordable amount. Of course you will pay more interest over the long term, but this may provide you with some breathing space while you seek new employment. When you get that new job, make up the payments or pay more towards settling your debt faster.
Opt for a debt review
If you’re drowning in debt and aren’t getting the help you need from financial institutions, the last resort is to speak to an authorised debt counsellor and consider undergoing debt review.
Debt review is a solution targeted at South African consumers who are over-indebted and struggling to manage their finances. Debt counsellors will assess your outstanding debt and implement a restructured debt repayment plan.
Go for counselling…
In my last article I touched on some of the big retirement savings decisions you would be faced with if retrenched.
It’s equally important to note that in line with the default regulations of the Pension Funds Act, as of March 2019 all retirement funds must provide retirement benefits counselling to joining and exiting members.
I would encourage you to take advantage of this benefit, as it is meant to ensure that members fully understand the language, risks, costs and charges of all investment portfolios, including the terms of the fund’s annuity strategy and the process by which the fund handles paid-up benefits.
There is no charge for this service and you should never be “sold” any products during the counselling process.
Importantly: retirement benefits counselling does not replace financial advice, as it only focuses on retirement savings and not your bigger financial picture. While I always encourage people to do their own research, independent financial advisors can be very beneficial in helping to map out the bigger picture and assisting to create a financial roadmap from where you are now to where you want to be.
Always educate yourself, apply your mind and make the best choice for you and your family.