Navigate your finances in a rapidly changing world

As South Africa’s lockdown restrictions ease in the wake of the COVID-19 pandemic, its impact on the economy will be long-lasting and challenging. 

Now is not the time for big decisions, but for reducing debt and unnecessary spending, allocating more to saving and generating additional income streams while waiting for the storm to pass.

During these uncertain times, it’s important to learn the basics of money management, and here are some tips that can help you navigate your finances in a rapidly changing world.

Beware of unnecessary spending

Lockdown has forced South Africans to change their spending habits, cutting back in areas like entertainment for the kids, clothes shopping or frequent visits to the hair stylist and nail technician.

With the country now at level 3 lockdown, there are more opportunities for people to treat themselves on non-essential items. Before you do that, always be conscious of what you choose to spend your money on by asking yourself “do I really need this right now?

Consider taking the amount that you would normally spend on these activities and place it in a savings account to provide you with a buffer during these uncertain times. Alternatively, you can also use this amount to increase your bond or car repayments.

Prioritise your bills

Bond payments for homes, car instalments, school, and university fees and credit card repayments are obligations you have to meet, in good or in bad times.

If your account was previously up to date, and you need help to get through the next few months with a reduced instalment, it is advisable to approach your service provider immediately. They may already have relief programmes in place to assist you and provide some level of relief.

Not contacting them and simply not paying your instalments will not resolve your problem, in fact it may actually complicate your money woes further down the line.

The same applies if you are currently renting a house or apartment. There is no getting out of paying your rent. Approach your landlord, explain your situation, and ask for a special concession of your lease agreement.

When it comes to the payment of school fees, write to your child's School Governing Body, advising the chairperson of your present financial situation. Depending on your financial standing, they may excuse the payment or agree on an arrangement to pay the fees over a period of time.

Find money in your current budget

Whether you want to start saving, investing or pay off your nagging debt, it might seem impossible with your current budget. Well, that’s what most people feel when approaching their finances; that there isn’t enough money.

Here’s a couple of places to find some extra fat in your current budget.

• Your satellite television subscription. This is easily one of the things you can do without. A premium DStv bouquet costs R819 a month (that’s R9 828 yearly, think what you can do with that!). If you simply cannot do without screen time, you can opt for the cheaper compact subscription at R399 a month. Even better, subscribe to Netflix where the basic plan will cost R99 a month, the standard plan R139 a month and the premium plan R169 a month. But, of course, you will have to take into consideration the cost of data.
• Your insurance premium. Don’t go cancelling your insurance but start by shopping around and comparing your existing cover to other similar options. Make sure you match what you have and that your coverage remains comprehensive. If you’ve given up smoking during lockdown, notify your insurer, to adjust the premium to a lesser amount. Even if it’s not a lot of money, you still get a saving.
• Your gym membership. When last did you actually set foot in a gym, and how likely will you return once the lockdown restrictions have been eased. If you consider that most unit trusts and exchange-traded funds start from R500 monthly, you can certainly put your money to better use.
• Your shopping lists. This might seem like an insignificant thing to do but writing down exactly what you need before doing your grocery shopping can save you a significant amount of money. Better yet, make use of a service that delivers groceries from local stores, charge minimal delivery fees and are customizable to your needs. I find this to be the most convenient way to shop, saving you not only time, but keeps you from buying items you don’t really need.
• Your bank statements: On a positive note, COVID-19 offers you an opportunity to get to know and hopefully understand your expenses a bit better. Make time to study your bank statement in detail, scrutinize your debit orders and identify debits that you may not be aware of or auto-renew subscriptions that you may have. Assess your banking fees and shop around for an option that is still comprehensive but not as expensive. Also see if your existing bank can offer you more bucks for your money. Quite an exercise - but one that will help you understand that you cannot spend more than you earn.

Avoid “get rich quick” schemes

If you own a mobile phone or have an email address, chances are you’ve received the marvelous news that you’ve either inherited a fortune from an unknown relative, won the lottery (without buying a lottery ticket), or can make millions working from home for a mere two hours a day.

COVID-19 has throttled South Africa’s economy. Many consumers are under severe pressure and more easily tempted to see a promise of extra cash or big savings as a lucky break - to their detriment.

“Easy come. Easy go” draws on the old saying that if a deal sounds too good to be true, it probably is. This remains one of the best pieces of advice consumers can use to guard against confidence tricksters and their scams, which have proliferated in the past few weeks.

Use a side gig to meet those money goals

A side gig where you offer your skills or services can be a great way to earn some extra cash to settle debts, start investing, or provide for those non-essential items. 

However, before you start, you need to do your homework and make sure you understand whether this is going to provide you with a real income. Often people realise too late that their side-gig is actually costing them money. Ensure that you fully understand your costs, including your time, petrol and data.

Once your side-gig starts generating money, open a low-cost bank account for the business so that you keep it separate from your personal finances. If you keep treating your business as an emergency fund to pay for ad hoc personal expenses, it will be difficult to get a handle on your earnings.