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Is Covid-19 clipping your financial wings?

5 key steps to regain some financial freedom during the pandemic.
Image: Shutterstock

Most South Africans say they are experiencing anxiety (55%) and nearly half are dealing with financial pressure (46%) and/or depression (40%) during the lockdown, according to a recent online survey by the South African Depression and Anxiety Group (SADAG). With the bleak economic forecast and retrenchments or pay cuts on the cards for many South Africans, it is not surprising that the nation is feeling financially stressed.

But not knowing exactly how long it will take for the pandemic to be brought under control and the economy to be fired up again need not mean we should forgo our future plans or abandon our financial goals, says Karabo Ramookho, Strategic Retail Marketing Manager at Old Mutual.

“It remains important to strive for financial freedom and stay focused on your goals and what you still want to achieve in life,” she says.

Financial freedom is defined as being in control of your own money and free to choose what you do with it. “From a financial perspective, it means you are able to pay your obligations on time and unexpected expenses don’t send you seeking a loan. It also means that you plan for the long term,” she explains.

If you want to achieve financial freedom, don’t let fear of the pandemic paralyse you. Remember the adage “this too shall pass” applies to the coronavirus too. Whether it takes a few months or years, the crisis will eventually be dealt with and life will resume – though it will undoubtedly be in a new format.

So planning for the future remains vital, and it is important not to lose sight of all the great things you have been planning to achieve.

Tips to help you achieve financial freedom

Review your goals for 2020 to manage your financial stress

You probably kicked off this year with great enthusiasm and a long list of things you’d like to achieve. Perhaps travelling to a bucket list international destination, upgrading to a  new car or buying a bigger house was on your 2020 to-do list. But Covid-19 threw a spanner in the works and lockdown has brought into sharp focus the real meaning of ‘essential’ and important.

You may have realised that the luxuries are exactly that and can be postponed to a later date.  Review your goals and their financial impact on your budget. Classify them according to non-negotiable, postpone or cancel, and assign new timeframes for achieving them. This process can help you manage your financial stress without feeling short-changed.

Take your budget from surviving to thriving

Take a close look at your finances (your income and expenses) and adjust your budget to see where you can be smarter with your money.

Sit down with your family if necessary and have an open conversation about your household spending as it could mean sacrifices from everyone.

A free budgeting app like 22seven from Old Mutual can be useful for seeing all your money transactions in one place. Once you’ve identified areas where you can save, you can use this money to start or add to your emergency fund. An emergency fund is useful to cushion you when you have unexpected expenses or when your income takes a dip.

Reduce your reliance on credit

Jay Z, the first hip hop artist to become a billionaire, famously said: “If you can’t buy it twice, you can’t afford it”. This is a useful tip together with “if you can’t pay for it in cash don’t swipe your credit card”, says Karabo. Any interest you pay on debt is money you could have saved. This is how managing your reliance on credit can help you get on the road to financial freedom.

“The urge to swipe now and pay for it later is strong in many of us. You don’t really see the impact of the swipes until it accumulates to a large sum, with very high interest,” adds Karabo. Budgeting is the first step to achieving financial freedom and helps to ensure you can cover your monthly expenses without relying on expensive credit options.

Less payments due equal less financial stress

 Having fewer expenses or debts that need to be paid can help with managing your financial stress.

If you can, settle your most expensive debt first. Also, be aware of the negative effects of skipping payments. If you are struggling to meet your payment obligations, talk to your credit providers and make arrangements. Many banks and other institutions are offering some payment ‘holidays’ during this unprecedented time. If you do not make arrangements and just skip payments it will impact your credit score, which can affect the cost of future credit and potential employment opportunities.

Plan to weather the storm

 With the prospect of no annual increases or bonuses this year and with many companies withholding dividend pay-outs, it will take careful planning to manage your finances and not rely on these windfalls.

If your investment portfolio and retirement savings have felt the impact of volatile markets, it is important not to panic and remember to think long term. If you are feeling uneasy, contact your financial advisor who can provide some perspective and can look at your specific situation to help you construct plans that provide peace of mind.

If you do not have a financial advisor, use this time to do your homework and seek great advice that will help you achieve financial freedom, Karabo says.

Karabo Ramookho, strategic retail marketing manager at Old Mutual.

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Jip, last sentence, financial advisor.
Just use your brain and spend your money wisely.

For many people the cause of this anxiety is not the virus but that the ANC are ‘supposedly’ in charge.

Beware financial advisors. Find a friend or family member if you cant do the budget yourself. Or a bookkeeper or accountant. Someone who charges a flat fee – not a percentage of everything you own.

“Financial freedom is defined as being in control of your own money and free to choose what you do with it.”

Sorry but that is complete nonsense.

Financial freedom is attained when your accumulated wealth is sufficiently large enough to generate an income that covers your lifestyle costs on a sustainable basis for the rest of your life.

Ironically even if the definition were in fact being in control of your money and free to choose what you do with it, Old Mutual and all the other life insurance companies would fail on that too…… their ‘investment’policies they still sell lock you in with extraordinarily high fees and a big penalty should you move so they can recover the huge upfront commissions they paid to their sales team…..errr financial advisors…..

If peoples only advisor experience is from one of these institutions I don’t blame them for being completely disillusioned…. if you cant do it yourself there really are good independent options out there! Ask around and steer clear of the institutions with the big billboards and TV ad’s as a starting point…..

End of comments.

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