In a very short time the coronavirus has changed so much about our lives.
It is easy to think you’ll never get ahead when you have mounting bills to pay, on a reduced or lost income and limited savings, all because of a pandemic that no one saw coming. But, it can be done.
Take confidence in knowing that with determination, understanding the support options available to you and having a realistic plan, debt and bills can be managed.
Here are a few key essentials in managing your finances responsibly :
1. Financial Knowledge and Confidence: During times like these, knowledge plays a crucial role in the financial decisions that we make. It is important to ensure you expose yourself to some form of financial education to ensure that psychologically, you are able to make the right decisions.
2. Credit Life Insurance: Enquire from your financial institution if you have credit life insurance linked to your credit agreement. Most people have credit life insurance but are not aware of it. If you have a credit life policy; check the terms and conditions of these policies as they may differ from one provider to the next in terms of what they cover. It is important to understand what you signed up for.
3. Lifestyle Adjustment: Create a new budget and split your necessities from luxuries and discretionary expenses. If necessary downscale your lifestyle, cut back on discretionary spending, and create some space in your budget. Consider ways to save on your necessities, such as the content of your groceries, moving to a smaller house and cheaper transport options.
4. Responsible Debt Consumption: Use credit responsibly; if you have already consolidated your debts, avoid taking additional debt.
5. Long Term Savings and Long Term Goals: Take a long term view when it comes to savings and investments. Don’t get tempted to disinvest because of panic. Markets are generally volatile over uncertain times such as these but will correct over time. If you happen to resign from your job in this time, resist the temptation to cash out your retirement savings. Preserve this money. Don’t borrow from your future.
6. Preserve Your Relationships: Whilst it’s cheaper to borrow money from family and friends, consider how much it could end up costing you if you lost the relationship due to unfulfilled promises.
7. Understand the Pros and Cons of Debt Relief Programmes: Before you approach a credit provider or accept an offer of debt relief or a payment holiday, make sure you understand the terms and conditions of the agreement.
8. Emergency fund: The current situation should serve as a learning experience to validate why it is important to save for rainy days. An emergency fund is not a luxury. Build an emergency fund over me to mobilse up to six months’ worth of a safety net.
Personal finance and making the right choices isn’t so simple, most people don’t have the expertise, which is essential when it comes to personal finance such as taking personal loans. This is why engaging with a trusted Financial Institution is a must when it comes to seeking a personal loan. Taking such action can be the helping hand you need in the short term, without giving you a financial headache in the long run.
* Otto Makemba is the Business Unit Leader Old Mutual Finance