What to do in the event of a sudden loss of income

Proactive steps to take

Setting up a budget

The easiest way to evaluate your financial situation is to set up a budget. This will help you to determine what expenses you need to continue to pay such as a home loan, cell phone contract and health insurance and other expenses that you can reduce. If you need help setting up a budget, our Debt Advisors are here to assist you.

Making less money work for you

It is hard to cut out specifics in your lifestyle that you could once afford. It is important to re-evaluate your circumstances and make the best decision on what is necessary. You could consider:

• Cancelling unnecessary expenses such as eating out and luxury clothing items
• Relocating to a smaller house until the situation changes or selling valuables you don’t need.
• Immediately talk to your creditors to inform them of the situation. Work out a plan to meet your obligations with them

Tally up all of your income sources and assets such as savings that may be able to get you through this uncertain time until you can replace your income.

Cut unnecessary expenses

If you’re without an income, look at your budget and make as many cuts as you can. Cut your takeout or dining out budget and stick to home cooked meals while you’re unemployed. By cutting out unnecessary expenses, you can put your emergency fund towards the necessities: food, housing, and transportation.

If you have debt, talk to your creditors

If you are worried about paying your bills during this time, talk to your creditors to find out if they have any options to help you. Many creditors have hardship programs in place for those experiencing financial loss. Some creditors may be able to extend your due date, waive late fees or offer different payment plan options. Take a few moments to prepare before you call so you can clearly communicate your needs:

• Call before your payment is due if possible
• Be ready to share why you are unable to pay, and how long you expect this to be the case
• Determine what you can reasonably pay during this time of difficulty

If you are feeling stressed by debt, exploring options such as debt management plans or working with a debt counsellor could help you reduce monthly payments and reduce the overall cost of your debt.

Credit Insurance

You can take out credit insurance on most debt products including card accounts, home loans, your overdraft, and vehicle finance. It is not always mandatory, so you need to check whether you have credit insurance in place.

If you took out an unsecured loan after 1 August 2017, it is guaranteed to come with the new credit insurance mandated by law. Credit insurance on these loans will cover payments if you become unemployed or are unable to earn an income. This type of cover means if you lose your job and entire salary, instalments will be paid for 12 months, or for the remaining period of the loan, or until you can earn an income again, whichever is the shorter period.

It is important to note that credit insurance won’t pay out for every type of lost income. The loss in your earnings needs to be in an unforeseen or unexpected event. A contract coming to an end, or similar foreseen circumstances will not be covered.

With Legal&Tax, you’re not alone

Our Debt Counsellors can help you prepare a budget that can help guide you through a time where you are facing a sudden loss of income. We can also assist with creditor negotiations on your behalf to work out a payment schedule that best suit you.

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