The Covid-19 pandemic has had a financial impact on most South African households. Many people have battled emotionally and the unexpected financial pressure has not made the situation easier. Given the predicted long-term repercussions, what are the best strategies to manage your money in these turbulent times?
Craig Kiggen, Managing Director of Consolidated Wealth, advises individuals to adopt a sensible approach to their personal finances: “To ensure your finances are positioned for life post-Lockdown and to relieve the burden of financial stress, you need to do some intelligent planning for the short- and long-term.”
The reality is that most individuals find themselves in one of three situations:
- You were deemed an essential service and earned a normal salary
- You were employed but at a reduced salary and you are not making ends meet
- You are unemployed and worrying about the bills that need to be paid
While each of these scenarios requires a specific financial plan, there are some general strategies that can be applied immediately. Craig shares some of his top money tips to help you manage your finances post-Covid:
1. Be smart about your debt
Many people have been granted payment breaks for rent, home loans and debt, but these are now ending. If you are struggling, talk to a financial adviser who will help you build a budget that addresses the best ways to reduce your costs. Every Rand counts and healthy money habits will help you to be more disciplined with your money so you can avoid maintaining your lifestyle on credit.
2. Insulate against emergencies
Building an emergency account is a smart financial decision and it’s wise to have enough money to cover three to six months of expenses. If this isn’t possible, put away a small amount every month in a savings account. Just make the start.
If you have surplus cash, avoid extra spending until you have built-up your emergency fund. Or you could put any extra money into an access bond as this will save on interest payments and give you access to cash when you need it. But be disciplined and don’t withdraw more than you have saved if you do access the funds.
3. Manage your Life Cover
In most cases, life cover is essential. It’s one of the foundations of your wealth management and will ensure that your family is financially secure in the event of your death, should your savings not be sufficient to for this. It is important to note that the purpose of Life Cover is to ensure your family maintains their current lifestyle – so as your wealth grows (through investments or your pension), you should be reducing your life cover. Many people are over-insured and the money your monthly payment could be delivering better returns if it’s correctly invested.
4. Make some positive memories
With all the changes in our lives, it’s important to review your household budget. For months, you haven’t had luxury expenses such as eating out or holidays and you will have saved money. Allocating these surplus funds to paying off your debt is key but don’t forget to put some money aside to enjoy yourself.
We work to live and while savings are important, everyone needs some down time. While it’s sensible to maximise your savings, special time with your family is vital. Go on holiday but instead of an expensive trip, buy a tent and explore South Africa. Make memories that will help you remember this time in a positive way.
5. Work with a Financial Planner
Every individual’s attitude towards money is unique. What is common is that we all need money to survive! The best way to achieve this is to work with a financial planner. They will help you build a bespoke strategy that is tailored to your personal circumstances and your appetite for risk – making the most of your financial situation in both the short- and the long-term.
Now you have some direction, it’s time to start putting your financial plans in place. Applying these five tips will help ensure that your finances are positioned to weather the headwinds we may face in the year ahead.