This has been a year like no other. We have to adapt constantly as we deal with changing lockdown rules, schools opening and closing, some industries operating with severe restrictions, and certain sectors of the economy unable to operate at all. So how do you manage when money is in short supply?
The impacts have been felt deep in our pockets, and many people are affected by the financial fallout. You or someone in your household may be on short pay, or perhaps even without a job or retrenched and reliant on UIF benefits.
When money is in short supply, stress levels go up. We need to realise though, that when it comes to our finances, there are only two levers that we can pull – money coming in and money going out.
If less is coming in, we need to cut spending, unless we can find a way of boosting our income. It’s all about balance and about adapting our behavior so that we make the right decisions in these tough times?
Here are some pointers that should keep you on the right track when money is in short supply:
1. Budget budget budget
This is such an important aspect – you need to plan exactly how and where you will be spending your money and make sure that you cover the essentials.
The last thing you want to do now is to go into debt, as this is using tomorrow’s money today, and will have to be repaid at some point. Without a tightly managed budget, you may fall into the trap of overspending.
2. Back to basics
Re-evaluate your financial priorities and budget accordingly. Our primary needs are for shelter, food, and safety and these must be paid for first. If you are unable to pay your rent or can pay only a reduced amount, have a discussion with your landlord and see if you can reach an agreement.
There is great awareness of people’s financial situations and many landlords will be accommodating, rather letting you pay less than losing you if you are a good tenant.
Cut out all luxury spending such as clothing (unless it’s essential), entertainment, even air time if you can.
3. Plan your meals and your shopping
Food takes a massive bite out of the budget – you can spend anywhere between 15% and 25% of your income on groceries, depending on how much you earn and what you buy.
This is the one area where you can really save money by being smart. If you are an impulse buyer (and most of us are), consider shopping online as it’s much easier to control what you spend.
Also, be adventurous and try out some meat-free meals and see where you can trim your budget. Plan what you will eat and draw up a shopping list.
But what’s in season and fresh is always much cheaper than frozen or pre-prepared.
4. Scrutinise policies and insurance
This is the one area where people tend to cut first as they see no immediate benefit in paying these premiums. Consider applying for payment holidays on policies and investments, instead of just canceling them, as this can have long-lasting financial impacts (such as the loss of life cover).
Speak to your insurer and see what they offer. For short term insurance, shop around and make sure that you are getting the best deal possible. We often forget to check on our short term insurance and just keep paying, year in and year out.
If you need to stop all contributions to long terms investments or retirement policies, do so until your financial situation improves.
5. See if you have cover for your credit arrangements
Many credit agreements have credit assurance policies attached to them – you may not even have taken in out intentionally. This may apply to your home loan, car loan, or even smaller debts such as store or credit cards.
By law, a creditor can insist that you have this cover and it will form part of your credit agreement. The premiums are paid by you and you should be able to see this on your statement, reflected as a separate item.
This type of cover traditionally only paid out if you were disabled or died, but since 2017 it also covers your repayments for up to 12 months if you lose your job and don’t earn an income.
Check with your creditors to see if you have cover in place.
6. Start your Emergency Fund
Living from payday to payday means that you are one payday away from disaster. An emergency fund gives you a buffer when things go wrong.
Many people will say that they don’t have any money to set aside, but it needs to be a priority in your budget, even if you start with only R200 or R300 a month.
Open a separate bank account for your emergency fund, so that you are not tempted to spend this month during the month, and let it build up slowly. If you want to kick start your emergency fund, why not declutter, sell your unused items, and put this money towards your emergency fund?
7. Get creative!
As difficult as these times are right now, there are also many opportunities that have come to the fore. Facemasks for one – a whole industry of home-based manufacturers have risen up and some are so creative, they have become a fashion accessory!
The food delivery business has also created many jobs, and there are other opportunities. Look at your skills and see what you can use to generate some extra money. Pull the “money in” lever and balance your budget.
Life can be overwhelming at times when we are faced with negativity and tough personal challenges. While we can’t control what life throws our way, we can control our reaction and how we adapt.
Find new ways of managing your money, adapt to your new situation, and perhaps even learn a new way of living that may last way beyond the current circumstances.
As the saying goes, “Tough times never last, but tough people do.”
This article was written by Sylvia Walker.
Sylvia Walker – http://sylviawalker.co.za/
SPEAKER | AUTHOR | FINANCIAL PLANNER
Resident Financial Guru – Cape Talk Early Breakfast Show (567AM)
Shortlisted for Sunday Times Alan Paton Award 2011 (Steeped in Blood)