6 ways to manage your money better during Covid-19
We’ve all been affected by the economic downturn. If you’re financially struggling, read our tips for making your money work harder for you during the lockdown.
1. DON’T PUT ALL YOUR INVESTMENT EGGS IN ONE BASKET
If you already have some money invested in the stock market, speak to your investment manager about ensuring that it’s as widely invested as possible.
Eric Petroff, founder of investment-advisory firm Petroff Institutional, suggests making sure that your stock investments are in companies that have good balance sheets and trade in essential products such as foodstuffs, as they are better placed to weather a recession.
2. RESIST THE URGE TO CASH IN YOUR RETIREMENT SAVINGS
As companies retrench employees to save money or go out of business completely, it may be tempting to consider cashing in your retirement savings should you find yourself out of work.
This should be a last resort, as you’ll end up crippling yourself in the future for a quick financial fix, says John Manyike, head of financial education at Old Mutual. Remember, depending on whether you are a member of a pension or a provident fund, that will determine how much money you’re allowed to cash in, and how you will be taxed on your withdrawal.
3. DON’T STOP SAVING
South Africans are known to be bad savers, as many of us lack financial discipline and splurge on luxuries like cars and clothing.
Even though our finances are coming under increased pressure due to the nationwide lockdown, the global recession, and the recent downgrade by Moody’s, it has never been more important to put a little extra money aside each month into a savings account if you can.
Carrie Furman, assistant tax manager at Allan Gray, advises that you should aim to save enough to cover your living expenses for three months should you become unemployed.
4. DRAW UP A BUDGET
This needs to be a monthly exercise that you get into the habit of doing, and it’s important that you try to include the whole family.
Start with your total household income, then deduct your fixed, variable, and irregular (or unexpected) expenses to get a sense of how far your money is taking you each month as well as where you can save some money.
Old Mutual has an easily accessible, downloadable PDF (oldmutual.co.za/resources/ monthly budget) to guide you through the budgeting process.
5. FOCUS ON BEING DEBT-FREE
Many companies are considering reducing staff salaries during the lockdown in order to keep trading, so the chances are many of us will have to start getting used to a lower income each month.
One of the ways to reduce the money flowing out of your account is to minimise your debt obligations, like credit cards or car repayments. Capitec’s Francois Viviers suggests making a list of all your debts, then focusing on paying off the smallest ones that generally have the highest interest rates.
He advises making the minimum payments due on your larger debts, then paying these off only once your smaller debts are settled.
6. GO BACK TO BASICS
It can be tempting to fill your shopping trolley with lots of added luxuries as you spend more time working from home and feeling the need to spoil yourself.
To keep a check on your grocery bill, prepare a shopping list before heading out and stick to it as religiously as possible. If necessary, draw up a separate grocery budget so that you know exactly how much you can spend at the store.
This article first appeared in the June 2020 print edition of S Mag. The Sowetan’s quarterly lifestyle magazine.