Do you get value from your spend?

Be intentional, committed and seek help when assessing your lockdown finances

Lockdown is teaching us the power of being intentional and flexible when it comes to our household finances.

Things you buy on credit impact on your time, because you have to devote more working hours to pay them and the interest off. Picture: 123RF/ANDRIY POPOV
Things you buy on credit impact on your time, because you have to devote more working hours to pay them and the interest off. Picture: 123RF/ANDRIY POPOV

By the end of the first week of the Covid-19 lockdown, many of us would have made minor adjustments to our budgets, such as redirecting our transport money into the household and entertainment pockets. 

Zanele Kunene
Zanele Kunene

Other people have put together a geyser on-off timetable to cut electricity costs and started meal preps so that food does not go to waste. All these adjustments show us the power of being intentional and flexible when it comes to our household finances.

One of the top 10 things South Africans ask Google about money is “where does my money go?”. I would like to add to that question: “what value does my spending create?”. 

The value has nothing to do with the feeling you get when you buy something, it has to do with the long-term impact it will have on your time, energy and resources. 

If you consider things you buy on credit, it impacts your time because you have to devote more working hours to pay it off, more resources (money) are directed to the high-interest rates charged on the accounts and your energy levels decrease because of the amount of stress debt brings to your life. 

As most of their time, resources and energy are devoted to debt, many people who can’t manage their debt feel like they’ve lost control over their lives.

If you are struggling with debt management speak to your credit providers about the payment plans that are available and which is best for you. Overcoming your debt gives you room to build an emergency fund and investments.

Budgeting has never been more important than it is right now. With the uncertainty of job security due to the negative impact of the lockdown on businesses, you need to manage your household finances and set appropriate expectations. 

The first step in putting together a budget is to look at how each pocket of your finances is currently financed. The different pockets are household, savings, transport and entertainment. 

As you put together the pockets, you should mark which are covered by credit and which by your income. 

The next step is to assess where you can cut costs and where you can be more flexible.  

A very important part of a successful budget is to set realistic expectations for yourself and your family. 

An honest conversation with your dependants on what you can commit to and where you may need assistance, creates a firm foundation for financial planning. 

Being consistent in what you’ve said is important for everyone, including yourself to take it seriously. When you are not consistent, people will mirror that behaviour to you as well.

With an adjustment in your finances comes an adjustment in your lifestyle, where you may now have to choose between a lifestyle expense and a need. It’s important that you let your status or ego take a back seat as you choose to invest in your life to create long-term value.

In the past week, quite a few clients have asked about stopping their investment debit orders, cancelling insurance and reducing their medical scheme packages. 

When you are cutting costs in your budget, it is important to ask for professional advice before making any rash decisions. 

Let’s say lockdown has forced Pearl to free up cash and she chooses not to pay her insurance premiums. Whereas she could have spoken to her insurance company about a premium holiday, which allows her to not pay her premiums for a specified period and still be covered, Pearl’s decision has now left her with no cover and possible higher premiums should she open a new contract when she is by the means.

We are currently living in unusual circumstances with great uncertainty, but we do have control over how we respond. As you assess your finances, be intentional, committed and seek guidance for a successful budget.

* Kunene is an associate financial planner at BDO Wealth Advisers

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