Managing and handling your money beyond lockdown
For a lot of people, the national lockdown has shown just how precarious their situation with money is. Most people in the country are on the low-income side of the financial spectrum and the lockdown is putting serious financial strain on almost everyone but especially this group.
SowetanLIVE put some burning personal finance questions to Anton Keet, the Programme Lead for 1Life’s Truth About Money initiative, to help those who are looking for better ways to handle their money post lockdown and beyond.
1. For someone who gets paid weekly, how should they be managing their money post lockdown, and how much should people be saving during lockdown in case of job loss or pay cuts in the coming months?
People should be holding onto as much money as possible by cutting down on their expenses. The main priorities for spending should be food, maintaining your “four walls” (rent/bond/rates/electricity/water), looking after your family and work-related expenses like transport if you are required to go to work, as well as your phone and data. The key is to make sure you have money to take you into coming months as far as possible, even if this is just a little – in other words how long you can continue to maintain your expenses if your income is reduced or worse, cut off. It’s important to speak to your employer about whether an income reduction might be a possibility, so you can plan effectively.
2. How long should people wait to spend money after lockdown?
Although this has been a challenging time in our lives from a financial perspective; we hope important lessons have been learned. As life gradually goes back to normal, we encourage consumers to prioritise how they spend their salaries in order to have a better handle on their finances, make sure they are able to survive as the economy tightens and to build a better financial future. To achieve this, we recommend prioritising finances in the following way:
- Save for emergencies and start investing for financial freedom
- Make sure your financial commitments are honoured
- Share a bit by giving those who may need a helping hand
- And then spend on your lifestyle
3. Is it advisable to continue with stokvel savings?
Stokvels have been great communal ways of saving money, especially as they are a joint effort that encourages financial discipline. However, during a pandemic stokvel committees may need to relook their procedures and pockets. Especially considering the possible complexities such as the number of normal contributors being disrupted or where people may be desperately needing to make withdrawals. It is ideal to continue saving at this point but to be specific, this means saving up cash for emergency expenses that may arise.
4. Any tips on how much and how should one start if they’re interested in saving/ investing but have a low income?
While responsibilities vary, and different people have different income needs, where possible, the priority right now is to put as much as possible into emergency funding and to maintain all the financial services products that protect the financial interests of yourself and loved ones.
5. How much of a role do you think crowd funding can play in alleviating people’s financial stress?
There is a lot of work being done here by smaller businesses such as restaurants and coffee shops that is proving quite fruitful. As these industries are very hard hit, many of them are relying on regular customers through crowd funding initiatives to be able to ensure they can continue to pay their staff during this time. While we are not sure whether this would pay for full salaries, it may well help them get through with the basics such as food and water – which is most crucial right now.
6. What are the money lessons that you hope people learn from the lockdown?
The ideal futureproof plan is to have an emergency fund that covers at least 3 months of living expenses. Even without a pandemic, this kind of financial protection should always be in place to protect people in case of a job loss for an employee or sudden loss of a key customer if you have a side hustle or an SME.
Ideally, we hope that consumers learn the following:-
Seek financial literacy to understand your money, how to use it and how to make it work for you. In this way, you are more likely to become financially stable.
- Try not to accumulate debt which worsens financial stress in times like this- Ensure you save for a rainy day
- Become more financially savvy when you have additional money, by investing rather than overspending
- Remember that your priority should always be your immediate family first – too often, loaning money to friends and other family members leaves consumers in their own financial pickle.
7. What else do you think is important for the public to know?
There should be a great emphasis on the importance of keeping expenses as low as possible during the lockdown phase, without letting your guard down when this quarantine phase lifts.
Social distancing will remain part of the ‘new normal’ for a while, which means it may take a while for the economy to recover and for consumers – those that have the option – to have the luxury to splurge financially.
Preparation is key. The possibility of another lockdown is also not completely impossible and so it is important that consumers are prepared. It is also important to note that although we all need to cut down our expenses, you should not use lockdown as an opportunity to not pay your accounts and debts.
If you are still earning a salary, then it could cause severe financial damage to be taking payment holidays when you don’t need to. In most cases, lenders will still be charging interest and other related costs, so you have to be very careful what you are agreeing to.
Also, do not forget the small business owners like extra mural teachers who rely on your income every month. We are all in this together and any support chain you break will affect others very drastically.
This is why we all need to focus a lot of attention on our financial decisions to make sure we are taking stock of where we are at - making sure we can continue to fund our priority expenses through this crisis and come out on the other side with as little damage as possible.