South African professionals facing sudden career transitions, such as resignation or retrenchment, are at a critical financial crossroads where the first 90 days can determine their long-term financial security. While this is a “high-risk financial window”, it can also be a great opportunity for recalibration and growth, according to Citadel Advisory Associate Zanele Zungu.

“The first 90 days are critical because it is a period of acute transition and is typically marked with emotional and circumstantial instability,” Zungu says. “Whether the exit was voluntary or involuntary, one’s emotional state can significantly influence immediate financial behaviour and the actions you take can either create renewed financial security or result in unintended and rapid financial destabilisation.”

Zungu advises that there are three key considerations to keep in mind to avoid common mistakes and achieve the best long-term financial outcomes:

1.   DO NOT Hold on TO A PAST LIFESTYLE

“The most common mistake and the easiest to make is maintaining the same lifestyle as before,” she explains. “This is typically a function of a lack of proper budgeting. Without adjusting spending habits to align with a new financial reality, individuals risk depleting their resources far too quickly. Once depleted, this could lead to a dependency on debt,” she cautions.

She highlights that the priority should be a thorough cash flow analysis and financial risk management. This includes assessing available liquidity, understanding current financial obligations and creating a realistic and disciplined budget. During this time, it is crucial to cut back on discretionary expenses and focus on preserving capital to ensure that available resources can sustain you for as long as possible, particularly in the absence of a predictable income stream.

2.    AVOID THE RISK OF EMOTIONAL SPENDING

“Periods of uncertainty often trigger fear-based or comfort-driven spending behaviours. Some individuals may spend impulsively to cope, while others may make reactive financial decisions without fully considering the long-term implications. This can exacerbate an already fragile financial situation,” says Zungu.

“It is critical to stabilise emotionally before making major financial decisions. A disciplined, intentional approach to money management, grounded in logic rather than emotion, can help individuals maintain their quality of life more cost-effectively,” she notes.

3.    PROTECT YOUR RETIREMENT CAPITAL

“Retirement savings should be treated with discipline and respect for their intended purpose. You should prioritise preservation as far as possible and only withdraw what is necessary for survival as an absolute last resort,” Zungu notes.

“If you must withdraw, look to do so in a way that minimises the tax implications and future loss. It is also important to be aware of the difference in the tax implications for retrenched individuals and those who have voluntarily resigned and are accessing the “savings pot” of their retirement capital. You may access your savings pot once a year (after you have exhausted all other liquidity options), but it is important to be aware that this withdrawal is taxed at your marginal tax rate from the first rand.”

Resignation withdrawals are taxed according to the withdrawal lump sum tables, wherein a lifetime tax-free limit of R27 500 applies. While the R550 000 lifetime tax-free withdrawal limit offers a potential lifeline for the retrenched in terms of the retirement lump sum table.

Zungu cautions that the risks of early access to retirement savings are both immediate and long-term and often deeply underestimated. “Firstly, there is a permanent loss of compounding. By withdrawing funds early, you are not only reducing your capital but also eliminating its ability to generate future returns over time. Secondly, early withdrawals are often taxed more aggressively. Thirdly, there is a behavioural risk. Once you normalise accessing retirement savings for short-term needs, it becomes easier to repeat this behaviour in the future. Lastly, there is the risk of a retirement shortfall. You are effectively shifting the burden to your future self, who may need to contribute more, delay retirement, or accept a reduced standard of living.”

CONCLUSION: STABILISE BEFORE YOU STRATEGISE

“Ultimately, the goal of the first 90 days is to create the mental and financial space needed to make informed choices that, if grounded in wisdom and intention, could become a powerful catalyst for financial growth,” she says.

This is why Zungu advocates for a “stabilise before you strategise” approach, focusing on cash flow analysis with a trusted financial advisor and securing benefits like medical aid and insurance before making long-term investment shifts. “A financial planning professional can assess your current financial landscape, identify potential risks and develop a strategy to navigate this period effectively.”

“Do not make permanent financial decisions based on a temporary emotional state,” Zungu concludes. “In many cases, it is not the event itself that causes long-term financial damage; it is the decisions made in response to it.”

“Rather than being discouraged, individuals should feel empowered to use their free time to rebrand, network and seek opportunities to reapply their skills and experience in new ways, positioning themselves for future opportunities. Much like financial markets, life moves in cycles - it does not remain in a downturn indefinitely. With intention, discipline, and a focus on what is within your control, circumstances will shift.”