The full impact of the Covid-19 pandemic is as yet unknown, but individuals have already begun to have their lives disrupted by the country’s economic shutdown, with retrenchments, salary cuts and forced unpaid leave making them take stock of their financial position.
The basic principles of financial planning are especially relevant at this time, but in the short term, cash flow is more important to many people.
To help safeguard you and your family’s financial security, here are some tips to follow to make sure you’re making your money work hard for you:
Draw up a budget
– this is especially relevant if you’re worried about possible retrenchment of yourself or your partner. This will help you know how much you need to cover your basic living expenses and where you can save money. Don’t only look at what you need to spend money on, but also when you think you will need that money. Perhaps you paid school fees upfront at the beginning of the year, or your car registration is only due again next year.
Check your bank fees.
Are you in the best structure for your needs? Are you paying for services that you never use? Consider moving banks to get a better deal.
Banks have waived the Saswitch fee payable for withdrawing cash at another ATM other than your own bank, but if you’re doing this, be aware of when this switches back as you can end up paying almost double the bank fees.
Did you know that you start paying interest immediately if you draw cash from a credit card and that you do not get three or six months’ interest free?
Go through your house while you have extra time and identify potential items which you could sell, as this will free up cash.
Where possible, pay cash for items as the interest rate on hire purchase items is very high and you pay around 20% more for those items than the sticker price. If you cannot afford the item and you don’t need it right now, wait.
Look around for bargains online rather than driving around. There are some good sales on, and you can support businesses that need your help.
At the same time, be aware of spending extra cash you could be saving towards your financial safety net. There are lots of deals available, so balance the need for the 70% off bikini or new laptop with being cautious about the future.
Use store coupons and discount vouchers. The main food retailers have loyalty programme structures that can be tailored to your specific spending patterns. Make sure you claim point or vouchers but look out for monthly costs to belong to a rewards program. Ask yourself if your monthly savings validate the cost. Optimally a reward scheme shouldn’t cost you money.
Check with your insurance company if your premium can be reduced because you’re driving less during lockdown.
Check your current insurances. Do an insurance rebroke. Make sure you are covered for what you need and take things off the list that you do not have any more and add what you have bought since the last update. Make sure you are not under or over insured and that your premium is market related. The cheapest premium isn’t always the best so be aware of exclusions and excesses and make sure you can afford the excess if you need to claim.
In most cases you can reduce your monthly insurance premiums by not having a cash pay-out in the future. If you want a pay-out, save the extra premium in an investment product, not a risk product.
Be wary of consolidating debt. You might pay a lower interest rate but it might well be over a longer period so the total interest paid will be higher. If you have debt issues, set up a debt plan with dates and goals to reduce the debt little by little. Do not give up.
Be aware that payment holidays are not a free loan, you still owe the money and you’re paying interest on it. Check with your service provider.
Remember that the pandemic will pass. Try not to panic as this may lead to rash financial decisions, which could have an impact on your finances later down the line.
Rita Cool is a Certified Financial Planner at Alexander Forbes