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Five steps to prepare for life’s surprises

They say two things are certain in life – death and taxes. But if there’s one thing the ‘Life Surprises’ survey conducted by Sanlam a while ago has taught us, it’s that life will also throw us some curveballs.

This survey, conducted among South Africans over the age of 50, found that 78,5% had faced at least one unexpected life surprise.

It also found that the events felt most severely – both financially and emotionally – had financial implications, such as loss of savings, a business closure or a retrenchment. The survey also showed that most people weren’t well prepared for these events.

Here are a selection of respondents’ comments:

  • ‘I lost my job because of illness. I couldn’t provide for my family when I lost my job.’ Male, Pretoria.
  • ‘Losing my job put me into uncertainty, and depression followed afterwards.’ Male, Cape Town.
  • ‘My father’s death at a very young age left us with no breadwinner.’ Female, Cape Town.
  • ‘I lost my house and savings and had to start again at 42.’ Male, Johannesburg.

Five ways to cover yourself

Start and maintain an emergency fund

This should be equal to between three and six months of your monthly salary. You need to be able to access it quickly so an investment such as a money market account is appropriate. This won’t solve all your problems, but will provide a healthy cushion in an emergency.

Have a financial plan

Work with a professional financial adviser to draw up a holistic financial plan for your life – in the short, medium and long term. As part of this process, think through some of the most financially adverse events that you may face – such as loss of income through illness, retrenchment or loss of a family breadwinner. Factor these into your planning so if they happen, the financial impact is mitigated – and in the process, the emotional impact too.

Have the right risk cover in place

This forms part of the financial planning, but is worth discussing separately. Risk cover is designed specifically to help you provide financially in case of unexpected events. Included in this category of insurance products are life, disability and severe illness cover, as well as cover to provide an income if you’re unable to work due to sickness, disability or injury. Having your financial needs covered if a big event takes place is essential for your future well-being, and that of your family.

Ensure you’re saving adequately

Many people see saving, for instance for retirement, as a grudge purchase when in fact it’s a process that actively builds up assets and can contribute measurably to your lifestyle and financial position. Making the right provision to save is another way to mitigate the effects of life’s unexpected events and can help you avoid becoming a burden on your loved ones.

Maintain an up-to-date will

A will protects your family from the fallout of a big life event. It should clearly state your wishes so your family isn’t placed in a difficult financial position when you’re no longer here.