Making your future Retrenchment-Proof
By Emmanuel Allottey
COVID-19 has ushered in an unprecedented contraction in economic activity in many nations. Business profitability has been stifled due to a combination of government-imposed lockdowns and other restrictions needed to address the public health crises. Employers have started implementing short term mitigations to lessen the financial impact of reduced revenue. These cost reduction initiatives include pay cuts, unpaid leave, and even suspension of contracts with some non-essential staff being made to stay at home. The harshest impact from the downturn is possible retrenchment.
During turbulent economic times, retrenchment remains a reality for many employees. Major industries such as construction, mining and banking are looking to cut huge numbers of jobs, with pressure on many companies to right-size their organisations. While it may be difficult to avoid retrenchment, there are steps you can take to ensure that your finances are retrenchment ready. These include;
Build up a nest-egg: the ideal is to save enough money to cover your monthly expenses on for a period of around 6 months. The purpose of having adequate savings is to ensure that, should retrenchment occur, you will not need to liquidate the cash from retirement benefits.
Get Insurance cover: There are retrenchment insurance options available which pay a monthly amount for a specified period of in the event of retrenchment. Ensure that there is no interruption in the payment of subscriptions and the policies are active.
Review your pension savings: It is important to review the sum of retirement funds that have been accumulated. If possible, seek to preserve these funds for your retirement so as not to interrupt the effects of compounding.
Pay down debt: If you have debt, take proactive action to ensure that it is being paid of regularly to reduce the debt. Explore the possibility of consolidation of the loans into a single payment to reduce the interest paid.
Get financial advice: consult with a financial adviser to recommend the right decisions in the wake of possible retrenchment. Some areas that the financial adviser will be able guide include severance packages, retirement fund benefits, group life cover and medical aid.
The continued decline in economic activity will lead to the worst recession in decades. Governments are vigorously implementing economic resuscitation measures to reverse the downward turn with expectation that economic recovery could be achieved in 2021. Managing finances during this time will improve your future financial situation, contact your financial adviser today!