What to Do if You are in Financial Distress

Contact your Lenders and Landlords for Help

If the impact of this virus affected your family income, then you may encounter trouble keeping up with your bills. Without an emergency fund, you could find yourself in dire straits.

Although it can be scary, make sure to approach the situation with a clear head. Instead of allowing late payments to damage your credit score for years, reach out to your lenders and landlord. Contact them as soon as you realize that you’ll be unable to make an on-time payment.

Don’t be embarrassed to ask for better interest rates, reduced instalments on your accounts or even payment holidays. Whatever you do, don’t ignore your debt obligations.

Most banks offer temporary pauses of your mortgage and vehicle payments. Once you’re able to resume payments, they’ll go over your repayment options.

Before you make contact, prepare to explain your current situation and how much you can afford to pay now. Also, consider when you believe you’ll be able to resume your normal payments.

You might be surprised, but lenders may be willing to work with you throughout this difficult time. Most lenders will go out of their way to help you successfully navigate this difficult financial time, especially if you’ve consistently made on-time payments in the past.

Ask for Payment Holidays on Annuities

Do not cancel or make annuities paid up. Ask for a payment holiday. Payment holidays of up to 12 months are possible in most instances. In this manner, you will be able to continue growth on your investment once your situation improved. Make sure that you know what the exact terms and conditions are.

Apply for UIF

Employees that have been retrenched can also apply for UIF if they register as a work seekers. You must apply for the UIF benefits as soon as you become unemployed or within six months of termination of employment. You can register and apply for UIF online.

Don’t Relinquish your Insurance

During this difficult time, it may be tempting to cancel your insurance policies. But often this is a bad idea.

We ordinarily need insurance cover for losses that we would not be able to carry ourselves or those losses that would result in great hardships or even financial ruin. It is likely in these uncertain times that, for most people, any losses could spell disaster.

Review your cover and see if this exercise might not result in some easy savings without compromising the amount and extent of cover they have.

Hold Off on Aggressively Paying Down Debt

Along with prioritizing your expenses, only make the minimum payment on your debts if you have lost income or are struggling financially now. Leave your debt alone. Focus on other things. That advice can feel contrary to what you usually hear, but you don’t know what’s going to happen tomorrow, next week or six months from now. For now, focus on keeping current with your debts, but don’t go to extremes.

Stay Away from Your Existing Retirement Savings

Cashing in 100% of your pension fund can be the most financially damaging decision you can make when you’re retrenched. Your retirement savings are your money for the future. It may be tempting to cash it all in and treat your pension fund as though you’ve just won the Lotto but don’t forget why you have this money saved up in the first place. If you cash in the entire pot, you’re robbing yourself at age 60 – it’s that simple. Before you cash in even a portion of the fund, find out how much tax you’ll have to pay on that money. That should be reason enough for you to keep your pension fund invested.

Look Forward

We’re living in unprecedented times, with the financial pinch becoming an increasingly common daily reminder of the impact of the economy. That’s why it’s even more important now to consult your financial planner and regroup your financial plan, adjusting it based on the impact your income may have suffered. It could be time to review your goals to help ease the pressure on your pocket. The structured processes that you follow when working with a professional in this field will help you to fully understand all the options available to you and make the best choices for yourself and your family.

The pandemic has been a social and psychological shock for many of us and your perspectives on life and what means the most to you may have changed. So, you may also need to re-evaluate your goals and re-think how you prioritise these. Among other goals, think about your retirement savings, your children’s education, your emergency fund, and any other dreams for your family to explore in the aftermath of the pandemic.