If your finances are in a somewhat tenuous position, now is a good time to take steps to fortify your financial position. Consider the following 20 steps:
- Check how accessible your emergency funds are
- Make sure your income protection benefit is linked to inflation
- Make more than the minimum payments on your credit card
- Check your credit record
- Check that your will is dated and revokes all previous wills
- Make use of technology
- Consolidate your charitable giving
- Make sure your RA premiums increase with inflation
- Register on your medical aid’s chronic condition programme
- Know your consumer rights
- Keep your receipts and develop a workable filing system
- Pay off high fixed interest debt as soon as possible
- Put a gap cover policy in place
- Formalise your relationship
- Keep your emotions in check
- Make sure your investments are well-diversified
- Check your employment contract
- Don’t fall for investment scams
- Consider a second source of income
- Clean up your online banking
In particularly uncertain economic times such as these, it is important to know exactly how accessible your emergency funding is. If your emergency funds are held in a vehicle other than your bank account, make sure you know the process you need to follow to access the funds and how many working days it will take to reflect in your bank account.
If you have an income protection benefit in place, check your policy to make sure that the benefit is linked to inflation. If you are permanently disabled and unable to work, your income protection benefit will pay you a salary until you reach age a pre-determined age which is usually age 65. If your benefit is not inflation-linked, the value of your benefit will diminish over time and will lose value in real terms. This will effectively mean that you will earn less money every year.
Where possible, ensure that you make more than the minimum payments on your credit card and pay before the due date to eliminate the risk of any penalties. Paying more than the minimum amount will allow you to pay off the capital quicker and reduces the interest that you pay over the longer-term.
A negative credit score can affect your ability to obtain financing, such as a home loan or vehicle financing, in the future. Covid-19 and the lockdown have taken their toll on many South Africans’ finances and if you’re in any way concerned that your credit record may have been compromised, do an online credit check, and then take steps to improve your score if necessary. Companies such as Transunion, My Credit Check and Compuscan offer this facility free of charge.
It’s surprising how many wills, especially DIY or off-the-shelf wills, do not include a clause that revokes all previous wills and which do not provide a space for dating the will. Take out your will and ensure that it includes a revocation clause and that it is clearly dated. In the absence of both, the existence of a previous will can cause confusion and family upsets if it is unclear which version of your will is the latest.
If the humble envelope system or a simple Excel spreadsheet works well for you, that’s great, but it is definitely worth doing your online research to find finance apps that can strengthen your day-to-day financial management. There are loads of free apps that can help you track your expenditure, do your budgeting, save, invest, eliminate debt and so much more.
If you’ve lost track of which charities you are donating to and how frequently, consider consolidating your charitable giving so that it forms part of your broader financial plan. Bear in mind that there are tax benefits for donating towards registered NPOs.
If you’re investing towards a retirement annuity, make sure that your investment contributions keep pace with annual inflation to ensure that the value of your premiums in real terms doesn’t diminish over time.
If you or one of your loved ones suffer from a chronic condition, be sure to register on your medical scheme’s chronic programme. Most chronic programmes provide for consultations and approved medication to be paid from the scheme’s insured benefits which means less out-of-pocket expenses for you.
Not knowing your consumer rights when it comes to returns, exchanges and refunds for defective products can cost you money. Many retailers take advantage of consumer ignorance by refusing to offer refunds or exchange products that are defective, so be sure to know what your rights are when purchasing high-cost items. An excellent resource for all things consumer-related is http://www.wendyknowler.co.za/.
Develop a filing system that works for you so that you can keep track of your purchases and expenses. Not only will this help from a budgeting perspective, but it will also facilitate easier product exchange or refund if something goes wrong and will strengthen your position should you need to claim from insurance for lost, stolen or damaged goods.
If you have previously purchased a vehicle at a fixed interest before the recent interest rate reductions, you may want to consider paying off this debt as quickly as possible to avoid paying unnecessary interest. If you have access to cash, it may make financial sense to pay off the vehicle and re-direct the extra cashflow towards your boosting your investments.
Private healthcare is expensive and just having a hospital plan in place generally won’t be sufficient in the event of an in-hospital event. If your hospital plan covers you at 100% of medical aid tariff, bear in mind that the doctor or specialist treating you while in the hospital could charge up to five times the medical aid tariff, and you will be personally responsible for settling the difference. A gap cover policy is an excellent way of covering this shortfall. But be sure to do your homework as the benefits differ from insurer to insurer.
If you and your partner are not married but are living together, formalise your relationship by entering into a cohabitation agreement. Use the agreement to determine what will happen to your assets and liabilities should the relationship come to an end. In the absence of such an agreement, you leave yourself particularly exposed financially in the event of a break-up.
The pandemic, lockdown and economic uncertainty have created the perfect storm for emotions to run wild. Making financial decisions when stressed, worried and fearful for the future can result in poor decision-making. Remind yourself that this crisis is temporary and, if necessary, find yourself a financial advisor who will partner with you and guide you through the emotions you are experiencing.
The impending US elections, the continued spread of Covid-19 throughout the world and the race for a vaccine mean that now more than ever a diversified investment portfolio is essential. No one knows what the future holds and it is never a good idea to try and pick so-called ‘winners’. If you’re uncertain whether your portfolio is adequately diversified, ask an independent advisor with no affiliation to any investment house for an unbiased opinion.
You may have signed your employment contract some time ago and have forgotten exactly what benefits you are entitled to. Take out your contract and make sure you are being paid in accordance with the terms of your contract including overtime, leave pay, bonuses, commissions and other incentives that you may be entitled to. At the same time, check your payslip to ensure that your deductions are correct.
Some investment scams out there are so sophisticated that it is difficult, without some serious digging, to determine whether they are genuine or not. Financial desperation makes you particularly susceptible to investment scams so be on the lookout for anything that looks untoward. If in doubt, forward any information to your independent advisor and ask them for an opinion.
Some whose incomes have been affected as a result of Covid-19 had come up with the most incredible ideas for creating alternative sources of income. There’s no doubt that times are tough but they’re also ripe for innovation, disruption and a new way of doing things. If you’ve got an entrepreneurial flair, consider taking a step towards generating a second income, even if it’s online zoom tutoring or delivering home-made meals.
Set aside half an hour to clean up your online banking. Take time to review and double-check your debit orders and their respective run dates, check your transaction fees, research other bank account options, strengthen your passwords and update your profile.