HOW TO MANAGE YOUR FINANCES DURING COVID-19

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01 August 2020

Written by Heinrich Sauls

It's the month of August, and there are still four months left until the end of 2020.

We are still in lockdown level 3 here in South Africa, and the COVID - 19 pandemic has caused a new way of lifestyle, in terms of the importance of your health and well - being, and finally not to forget your personal income and spending habits.

Since lockdown, my new normal has given me the opportunity to spend most of my extra time informing myself about money matters through the medium of radio, television and the web.

After gathering and unpacking the notes I had made prior, I decided to redraft my previous budget plan to a new one, which had since helped me in reducing my monthly expense and have a better forecast improving my total income.

I am not a financial expert by any mean, but I would like to share a few tips on how I have managed for the last four months minimizing the knock on effect your wallet may have had during lockdown.

STEP 1. Re organize and adjust your budget.

If you received a basic income, use your bank statements and accounts to make a list of all necessary expenses.

Monitor all your spending and prune wherever possible.

STEP 2. Keep debt to a minimum.

Take hold of credit card spending.

Resist making inessential purchases and when in doubt about a buy, don't make it.

STEP 3. Try to renegotiate your credit with your creditors.

I had contacted my creditors, and they were very helpful in extending my repayment terms, which had ultimately reduced my monthly instalment, and also eased the pressure on my budget.

Please note:

Do not forget to check if additional interest charges are involved and if so, think carefully before you make any decision.

STEP 4. Make ' value for money ' your motto.

Do not attempt to buy a single unnecessary item even if it's cheap and especially not if it's perishable.

Before buying a big or expensive item, consult someone you could trust that may advise you that you buy right and don't waste your bucks.

STEP 5. Check whether you took Credit Life Insurance.

If you have signed up for a credit card or personal loan, make sure that your insurance covers instalments for a period of up to 12 months, if you are unable to earn an income, retrenched, temporarily or permanently disabled.

Different financial service providers may have different terms and conditions, however it is worth enquiring before you attempt to make a payment arrangement.

STEP 6. Plan Low - Budget meals in advance.

Instead of buying prepared, prepackaged or precooked meals, prepare your own meals.

Not only is it far healthier to eat freshly prepared food, but cooking can become a fun family activity.

You can also switch to no name brands - they are often more reasonably priced, and of the same quality as the more expensive brands.

STEP 7. Nurture the saving habit by using debit order if receiving a full salary.

A good idea is to set up a debit order for your savings, so that you won't be tempted to spend the money you should be saving.

This means the bank will automatically put the agreed amount into a savings account each month, and you can't access it until an agreed date.

You should also set up a 'rainy day' fund for emergencies - preferably in a separate savings account that doesn't charge any fees to transfer money into it.

STEP 8. Reinvest dividends and interest payments on your investments.

Set short term savings goals.

This means setting your money aside to further your studies, or put down a deposit on a house or car.

There is a wide range of investment products that can be considered for short term savings goals such as money market or notice deposit accounts.

Have medium and long term savings goals.

For instance, saving for your kid's education or your retirement can be met either by a balanced unit trust fund, retail savings bonds or tax free savings accounts.

Investing in a Retirement Annuity (RA) also has tax benefits.

You should also make full use of the tax incentives that are available to Provident Funds and Retirement Annuities.

Do remember that not all retirement products are the same.

The biggest differentiating factors are fees and flexibility, so it is best to shop around a bit and seek the help of a financial advisor before committing.

Adjusting your finances during COVID - 19 may be frustrating because of the impact it's having on your household.

The only way to have a healthy budget is to live within your means.