How to survive loss of income or retrenchment due to Covid-19
Written by YFM on 22nd Sep 2020
Facing retrenchment or the loss of income is a very frightening experience and it’s never an easy topic to discuss. But, Mapalo Makhu, Absa Money Wellness coach says that it is critically important, especially considering how the Coronavirus lockdown has affected many businesses. As they count the economic costs of the pandemic, many started to cut back on staff to stay afloat, in many instances as a last resort.
On a personal level, it is easy to equate your job with your identity and a lot of our self-worth is often attached to our job. But, we exist beyond the boundaries of the roles we fulfil in the workplace and our self-worth ought not be defined by our jobs.
If you faced retrenchment or have lost your income, make a conscious decision to be kind to yourself. Realise that retrenchment is a fact of the market, and not a judgement of who you are.
So, how does one deal with the emotional effects of retrenchment? Ask yourself: “What decisions can I take now that I am retrenched” and focus on the things you can control, says Makhu. Speak to your family about the retrenchment or seek the advice of a financial advisor about ways to adjust to your present finances.
And while being retrenched is a financial blow, legally it allows you to access many benefits. This includes better tax rates.
You can take up to R500 000 tax free from a combination of your retrenchment package and pension. This assumes, however, that you have not withdrawn from a retirement fund previously.
While the retrenchment package itself is there to assist you with your day-to-day expenses, try not to use the retirement benefits portion for daily living as this could have a material impact on your future retirement benefit.
Think of your retirement fund only as an emergency in case you are unable to find work after your UIF and severance package payment has run out.
Steps to take if you are retrenched
- Draw up a survival budget
- Sign up for UIF online
- Speak to your creditors and don’t just let your debt repayments
- Speak to your car and home insurer – your policy may include cover that waives your insurance premiums for a period of time after being retrenched, which means you still have insurance in place even when you cannot afford the premiums.
- If you have a home loan, contact your home loan provider immediately – In most cases you may have some form of credit insurance in place.
Retrenchment comes with a lot of challenges but the most important thing to remember is to remain level-headed. Some people often panic by immediately using their retrenchment package to start a small business. Remember however that your pension is for your RETIREMENT!
Do not start a business with ALL your savings and rather take a portion of the retirement money and start a business you can run successfully, says Makhu.