Money Management In A Time Of Crisis

Reboot your finances and avoid common mistakes in these trying times

As we reset our minds to accommodate the new normal, we also have to rebuild our lives. Sadly, the pandemic has cost us our loved ones, left many without jobs, and wreaked havoc on the economy and household finances. According to Old Mutual’s Savings and Investment Monitor Covid-19 report, 38% of women who earn between R20 000 and R80 000 per month, provide financially for their parents or extended family as well. And more than half experienced overwhelming stress levels when it came to their finances during this time. So, if you’re struggling a bit, you’re not alone.

A SETBACK

For marketing manager, Ncamisile (34), the financial challenges brought by Covid-19 meant she had to become creative to make ends meet. “Being in the hospitality industry, we are among the worst hit. My husband and I had just bought a house and we struggled with the bond repayment after we were hit with pay cuts. We used some of our savings to fix up two cottages on our property and rent them out. The income helped with the bond, but we are still struggling to build up our savings again,” she says.

If your finances took a bit of a knock, it’s time to start afresh. Get your finances back on track by avoiding these common financial mistakes that people make.

DOING IT ALONE

Financial education is important, and a good financial adviser should be able to help you plan your finances. “They will discuss your needs and goals and help you put together a financial plan. They can also recommend financial solutions to help you to achieve your goals. It is important to ask them about planning for life’s ‘what ifs’. Make sure you have short -term insurance to cover any accidents or mishaps with your car, home or valuables,” says Old Mutual’s strategic retail marketing manager, Karabo Ramookho.

NOT PLANNING AHEAD

Good money management starts with a good plan. “The pandemic has left many of us realising that we are illprepared financially. Make sure you plan and have a clear long-term vision,” says Old Mutual’s head of financial education, John Manyike. Save for emergencies, build up a nest egg, and invest for your future.

NOT ADDRESSING DEBT

If you already have debt and are struggling with payments, make sure you don’t ignore them. “The biggest mistake you can make is to be in denial about your dire financial situation. Address the matter before it becomes a problem. If it is already a problem, don’t ignore it, hoping it will disappear – it won’t. Avoiding your creditor’s calls won’t help. If you get a letter of demand, do something about it immediately. But know your rights – the law says no debt collector is allowed to threaten, intimidate or use force against you (the debtor). If they do, you can report them. The National Credit Act protects your rights and all creditors have to adhere to it,” says Ramookho.

You can also negotiate with your creditors. “Explain that you are unable to pay the account in full, but if they are willing and you are able to, you will pay a reduced amount. It is important that you don’t overcommit yourself with your repayment plan,” advises Ramookho.

NOT BUDGETING

Without a budget, you run the risk of overspending. “Plan your finances and stick to that in order to avoid nasty surprises,” says analyst Wendy Makhado of Mazi Asset Management.

Many banking apps have budgeting or money-tracking tools to help you rein in your spending. “For example, there is 22seven, a free budgeting app by Old Mutual. This lets you see where your money is going, so you can cut waste, and put more money towards the things that really matter to you,” says Ramookho.

DISINVESTMENT OR WITHDRAWAL OF FUNDS

Withdrawal of pension funds or disinvesting your money may seem a quick way to get cash, but it’s never a good idea, as it takes away money from your future. “Don’t be tempted to disinvest because of panic. Markets are generally volatile during uncertain times, but will self-correct over time. And, if you happen to resign or are retrenched from your job during this time, avoid the temptation to cash out your retirement savings. Preserve it – don’t borrow from your future,” says Ramookho.

NOT HAVING ANOTHER INCOME

The certain way to make your money grow is to bring in more money. If you have a full-time job, a side hustle could be one way you could do it. “Increasing income may not be as easy for many, but if there is a craft that you can do and it can generate income, have a go at it,” says Makhado. Think about what you’re passionate about – it could be fashion or farming. Your passion project could bring you joy and supplement your income at the same time.

NOT ADJUSTING YOUR EXPENSES

The two most important things to do first, when looking to rebuild your finances, are to reduce expenditure and to increase the money coming in. “Do this by cutting out non-essential spending such as eating out and money-based entertainment, re-negotiate your insurance, downgrade some of your higher expenses and, most importantly, pay your future self by investing for the long-term, and saving,” says Makhado. ■