By Cebile Zibi,
Major life shocks rarely come with a warning. Alongside the emotional impact, they can create immediate financial pressure at a time when you have the least capacity to deal with it.
When everything feels uncertain, the instinct may be to make quick financial decisions to regain control. But what provides relief today could create financial difficulties tomorrow.
The first priority isn’t to solve everything. It’s to understand what needs attention now, what must be protected, and which decisions can wait.
Where possible, avoid rushing into major financial decisions such as selling property, cashing in investments, or withdrawing retirement savings before understanding the longer-term implications. Some decisions are difficult or costly to reverse.
Five financial priorities when life takes an unexpected turn
When your circumstances change suddenly, having a clear starting point can help restore a sense of control.
- Understand your immediate cash position: Establish how much money you have available, what income you can expect and which payments are due over the next three months. This will help you understand how long your available funds may last and where immediate adjustments are needed.
- Separate essentials from expenses that can wait: Prioritise housing, food, transport, utilities, essential insurance premiums and debt repayments. Review subscriptions, discretionary spending and non-essential debit orders to identify where you can temporarily reduce expenses.
- Speak to lenders before you fall behind: If you anticipate difficulty meeting repayments, contact your lenders early to discuss available options. Check whether any loans have credit life insurance that may provide benefits following retrenchment, disability or death, subject to the policy terms.
- Protect what protects you: Cancelling insurance may seem like an immediate way to reduce expenses, but it could leave you financially vulnerable. Before cancelling or reducing cover, understand what protection you would lose and whether more affordable alternatives are available.
- Get your financial documents together: Gather bank statements, insurance policies, retirement fund information, employment contracts, wills and relevant identification or marital documents. Having this information accessible can make it easier to establish your financial position, submit claims and obtain appropriate advice.
Different life shocks require different financial decisions
Although the immediate priority is financial stability, the decisions that follow will depend on what has changed in your life.
If you’ve lost a spouse or partner, alongside grief, you may face uncertainty about household income, outstanding debts and access to funds.
Start by identifying insurance policies, retirement benefits and other financial assets. Bank accounts held solely in the deceased person’s name may be restricted during estate administration, while certain benefit payments can take time.
Life insurance proceeds payable directly to nominated beneficiaries may provide financial relief. Retirement fund death benefits, however, are subject to a separate process through which trustees identify and consider eligible dependants and nominees.
Before using your own money to settle debts, establish who is legally responsible and how the deceased estate will be administered.
If you’ve been retrenched, the immediate challenge is replacing or managing the loss of income while protecting your longer-term financial position.
Understand your severance package, outstanding leave payments, potential Unemployment Insurance Fund (UIF) benefits and any insurance benefits that may be available.
Also establish which employee benefits, including life, disability and medical scheme cover, may end when your employment does. Where continuation options exist, there may be important deadlines.
Before withdrawing retirement savings, consider the tax implications, applicable withdrawal rules and the impact on your future retirement income.
If you’re navigating divorce or separation, moving from two incomes to one can fundamentally change what is financially sustainable.
Rather than simply adjusting your old budget, build a new one around your current income, expenses and responsibilities.
Review joint debts, insurance arrangements, financial obligations and the ownership of assets. Your will and beneficiary nominations may also need attention, taking into account any legal obligations and the terms of your divorce or separation.
Rebuilding a financial plan for the life you have now
Once the immediate pressure begins to ease, the focus can shift from financial survival to rebuilding stability.
This may mean gradually restoring emergency savings, reviewing insurance needs, adjusting investment contributions or reconsidering the timelines attached to important goals.
The financial plan that worked for your previous circumstances may no longer be appropriate for the life you’re living now.
This is where professional financial advice can make a meaningful difference.
A financial adviser can help you assess your position, understand the implications of different choices and prioritise decisions according to their urgency and long-term impact.
Importantly, good advice recognises that not everyone has substantial emergency savings or the flexibility to postpone financial commitments. Accessing savings, restructuring debt or reducing expenses may sometimes be unavoidable.
The objective is not to make perfect decisions under difficult circumstances. It is to make informed ones, with a clear understanding of the trade-offs.
A major life shock can change your financial circumstances overnight, but rebuilding financial stability takes time.
You cannot always control the event that changes your financial life. But with the right guidance, you can make more confident decisions about what comes next.
