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Unemployment in South Africa recently rose to around 29%,
with large companies in sectors ranging from banking to mining, media and
construction announcing job shedding.
Standard Bank, Absa, Alexkor, MultiChoice, Tongaat Hulett,
Impala Platinum, Sibanye-Stillwater, Tiso Blackstar and others have all made
headlines for large-scale job losses – some running into the thousands.
Petrie Marx, Product Actuary at Sanlam, offers tips to
mitigate the financial risks if you find yourself facing retrenchment.
1. Credit life cover
“One of the best ways to protect you and your loved
ones when taking out a loan is to invest in credit life cover,” Marx says.
“Usually, it’ll be offered to you by the credit provider on the back of
the loan you’ve applied for. It protects you in two primary ways.
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Firstly, your lifestyle is protected as the credit provider
will not lay claim on the asset that was financed, e.g. your family’s home in
the case of a mortgage agreement. But secondly, and even for unsecured loans,
it won’t leave you, your loved ones, or your estate, with debts that still need
to be paid off should you be permanently unable to repay the loan as a result
of unexpected death or disability.”
The credit provider will not lay claim on the asset
financed, e.g. your home in the case of a mortgage, explains Marx. Secondly, in
the case of even unsecured loans, you and your loved ones won’t be left with
debts that still need to be paid off if you are left permanently unable to pay
the loan in the event of death or disability.
In the case of retrenchment or temporary disability, the
policy’s minimum benefits must include servicing your loan instalments for a
period of 12 months, says Marx.
2. Control debt levels
Ensure your overall repayments are under control at all
times, but especially if the industry or business you work in is feeling the
effects of slower economic activity, Marx advises. If you are facing a time of
economic risk, don’t be tempted to make more debt – control your budget more
carefully than ever.
3. Be smart about the debt you do have
Guard against unnecessary loans, and first pay off your most
expensive debts, such as credit cards and retail debts for clothing and
furniture. Short-term debts tend to be the most expensive, while longer-term
debts, such as home loans, tend to have more favourable interest rates. Compare
what you are paying on your debts carefully to ensure you save the most money.
4. Have a reputable financial adviser on speed
It’s always best to speak to a financial adviser to ensure
contingency plans are in place should curveballs hit, says Marx. Ensure you are
going to someone reputable with a proven track record.
a rainy day while you can
If you are fortunate enough to have a stable income, use the
time well. While you are working and have the means to save, aim to have an
emergency fund of at least six months’ salary, that you can call on in the case
something adverse, like a retrenchment, happens unexpectedly.