The Covid-19 pandemic and national lockdown have brought finances into sharp focus for many people.
Even if you did not intend to do an audit of your personal finances, the time in lockdown may have given you the opportunity to do precisely that. Whatever the outcome, knowing where you stand financially is always a positive, says Neil Thompson, Head of Product and Customer Value Proposition at African Bank.
“There are many benefits to analysing your financial situation. We often neglect this - it is the classic burying your head in the sand syndrome. However, the economic situation amid the Covid-19 lockdown is an unescapable reality which has seen consumers wanting to take more control of their finances in an attempt to be better prepared for what lies ahead.”
Thompson advises those who have not yet done a “lockdown” audit of their personal finances to do so as soon as possible. “You may be pleasantly surprised at how your spending habits have changed as a result of lockdown, or how much more aware you are of your debt responsibilities, for example.
“There are valuable money lessons we can take from lockdown and many smart ways to make the most of these,” he says.
5 lockdown money lessons:
1.Save for a rainy day:
How handy would an emergency savings fund be right now? If you haven’t already started one for your family, make it a priority. The best way to grow this fund is to create a debit order for a set amount into a high-interest savings account each month. When unforeseen life events happen, you can have the money aside to cope, whether it is a major car repair, an illness or a retrenchment. The benchmark is to have at least three to six months’ worth of income in an emergency fund. This may sound excessive but if Covid-19 has taught us anything it is the importance of saving money.
2.Share costs:
Not using your car every day in lockdown has saved a fortune on fuel and wear and tear. Consider carpooling with colleagues from now on and put the money you save into your emergency savings fund. Families may also have bought groceries together before lockdown, so why not keep this up?
3.Curb spending:
Less time on the road means less shopping stops - which means less spending. Even if it is just that coffee from the garage shop every morning it all adds up and your wallet is thanking lockdown for a fuller belly this past month. Write down everything you buy in a week and then assess which items you really don’t need. Cut this type of spending to make a significant difference to your bank balance each month.
4.Budget:
The current economic crisis has everyone scrambling to budget for the lean months ahead. But, we should not only be budgeting in a crisis. Make it part of everyday life. A budget is the best way to track income and expenditure and pay debts off. Be realistic and adjust your budget as you go along.
5.Deal with debt:
The worse thing to do about debt when you are struggling financially is nothing. If you need help, check the fine print on your loan agreements to see whether you can benefit from insurance cover, such as Credit Life.
Thompson says getting real about your financial situation can be daunting, but if you know where you stand you can take the necessary action quickly and avoid damaging your credit score or credibility with lenders in the future.
“It is empowering to have control over your finances. Avoid your finances having control over you by taking the lessons you have learnt in lockdown and applying them to the way you deal with money in future.”