Tips for Surviving the Coronavirus pandemic (financially-speaking)

DISCLAIMER: Please speak to your advisor before making any decisions or taking any actions relating to your financial wellbeing – the greatest value we can add at this time is to evaluate the consequencesof the decisions you may be forced to make, and find the best options available to you, our valued client. We are living through the stuff that future generations will refer to as “2020: The Year the World Shut Down!”

Who would have believed it, if someone told you a mere 6 weeks ago, that you would be locked in your own home, your kids would be off school, your business or place of work would be closed, and the Military would be appointed to ensure compliance to a nationwide lockdown?

In these unique and unprecedented times, the challenges we are each facing are unlike anything we could have imagined (and by that I don’t mean how much toilet paper you can buy on your next trip to the shops!) Households and businesses are being forced to make hard-hitting decisions. The choice between trying to stay afloat and emerge on the other side, or give up and hoping for the best is unfortunately facing everyone, regardless of age, race, religion or political-stance.

Those businesses, individuals, and households with savings, investments, the ability to continue earning, and with access to capital will hopefully make it through this tough time. But those in less fortunate positions will need to make changes to limit the financial impact of the shutdown in whatever way they can.

What to do at a time like this?

Being forced to stay at home gives one time to think, plan, and explore better ways of managing your affairs. As your advisors, we’re spending our days doing just that on your behalf, and have compiled this list of suggestions and options that you can use in ensuring you emerge from this lockdown stronger and more empowered to make financial decisions.

Review your Budget

Rule number one of any financial plan is drawing up a budget. The old saying, ‘Having a budget is a way of telling your money where to go, as opposed to wondering where did it go’, is more true now than ever before.

  1. Go through your bank statements, review and list all of your Fixed Expenses (utilities, loan repayments, school fees, internet, etc). These costs are not easy to change, but you may find excesses that can be cut back. Perhaps there is a better deal from your internet service provider where you can save a few hundred Rands, or maybe there’s a debit order going off your account that you weren’t even aware of and no longer need. Every Rand saved is equal to a Rand earned!
  2. Take a dose of discipline-pills and start managing your Variable Costs. Going out for a weekly dinner, purchasing take-aways, or indulging in ‘retail-therapy’ are not necessities. During a lockdown many of your variable costs are not going to materialise, or even be available to you – but at least you can quantify how much you’re likely to save during this time.

All in all, budgeting is the starting point for everything that follows herewith – so don’t delay!

Review your debts, loans, and liabilities

If you think you are going to be under a cash flow squeeze because of the lockdown, talk to your bank!  Always remember that the bank primarily cares about getting their money back from you once you have borrowed it. Your bank would far rather restructure your loans in a manner that makes this happen than risk you defaulting. Nobody wants to avoid a default more than your bank! It’s expensive and risky for a bank too, as whatever collateral may be standing as security behind your loans is likely to be worth less than what it was before the Coronavirus pandemic, making it even less palatable for your bank to manage a default.

Each of the options listed here will certainly cost you more interest, but that may be a small price to pay for staying afloat:

  1. Consider consolidating your loans and paying off the accounts with the highest interest first
  2. Discuss options of extending the term of, and/or restructuring the loan
  3. Look at refinancing your asset for a further period
  4. Explore the options of paying the interest only for the next few months, and picking up on principal debt repayments thereafter
  5. Contact your bank and discuss whether you have a credit protection policy structured as part of your loan. Banks are usually insistent on these policies before even granting a loan, and most consumers do not even know they have one. Many credit protection policies cover the repayment of your loan in circumstances where you cannot – check with your bank to see if you qualify!

Most of the major banks have already announced lain repayment options consumers over the past weeks. While each individual’s circumstances and needs are going to be different, have the discussions with your bank now while there’s still time before the end of April and the next wave of debit orders.

Talk to us about your Portfolio

As your advisors, our experience and input extend beyond making sure you’re making the optimal decisions regarding your wealth. At a time like this, we can add invaluable insight to the consequences of decisions you make now. While we advocate that don’t make changes to your insurance and investments under the current climate, we understand that it may be the last remaining avenue open to you in order to reduce your monthly costs. If this is the case, please contact your advisor and let us explore the available options and features on your specific policy or policies.

  1. Many of our clients’ portfolios contain flexible investing options, where you can put your regular debit order on hold without incurring penalties. You can always pick up on these when you’re earning again
  2. Look at the clauses on your short-term insurance policy. If you are paying a higher premium on your vehicle cover due to your using your car for work, you are certainly not presenting that risk to your insurance company during the lockdown period. Enquire about a reduced premium over this period, without compromising on your cover!
  3. Life Insurance policies are not as simple, but many life insurance providers have presented options for clients to take a premium holiday or pause their cover while their finances are under pressure. This course of action carries massive consequences, particularly during a global pandemic when your life or illness cover may be more valuable to you than ever before.

We are living through unprecedented times. However, with this great upheaval, comes the opportunity for each one of us to re-assess and analyse our lifestyles and spending habits, and position ourselves for a stronger outcome when life gets back ‘normal’.