Advertorial: Financial lessons from the pandemic
‘Can you afford a new car, new house, loss of income, expensive surgery, an extended period of illness? Probably not, and certainly not all at once.’
Although the world has been catapulted into an unprecedented and unpredictable time of change, perhaps this shift can provide some much needed personal financial perspective.
Many of us may not focus on our finances until a crisis hits. But Covid-19 has taught us that you really do have to plan for emergencies, and your financial decisions don’t exist in a vacuum.
So says Marian Nel-Fouché, Regional General Manager at Momentum.
And there is no denying that this past year’s “emergency” has had a devastating effect on the personal finances of many South African households. In fact, the Momentum/Unisa 2020 Household Financial Wellness Insights report estimates the loss of gross income from South African households to be around R331 billion.
“Clearly this is the perfect time to learn some valuable financial lessons.”
Nel-Fouché shares some key financial advice to take out of the pandemic.
- Curb spending lessons:
If we have not learnt anything from this last year it is that the future can be wildly unpredictable,” says Nel-Fouché.
“Financially, this unpredictability means that your money is more at risk.”
Instead, she says many of us have learnt that the best we can do for our financial security is audit our lives, go through all our accounts, manage our debt and adjust our spending habits so that we can start saving more to provide some extra padding to our budget.
- Save for a rainy day:
This extra padding is extremely important, says Nel-Fouché.
“You have heard about saving for a rainy day; that rainy day has come for many South Africans. You could be next.”
This is why she believes that saving has to become an absolute priority, although she says it should always have been the case.
“Even before the pandemic, life was unpredictable. Economies fluctuated, industries evolved, and unemployment was a reality for millions. There has always been a need to be prepared for the unexpected.”
Nel-Fouche says this was not only true for jobs, but our most important assets too.
“Our cars and our houses are also at risk. Without the right insurance products, such assets are financially devastating to replace.”
- Do not cancel cover to free up cash:
Although many people are tempted to cancel their insurance products to save money, Nel-Fouché warns that gambling with one’s assets, health, and livelihood at a time of such instability is simply unadvisable.
“You really need to understand that you are putting yourself more at risk. Consider what you could financially endure if something disastrous should befall your car or your house. Is it worth saving a few hundred or even thousand Rand?”
Pandemic or no pandemic, she says we need to truly understand the ramifications of taking on this risk.
Can you afford a new car, new house, loss of income, expensive surgery, an extended period of illness? Probably not, and certainly not all at once.
“Before you consider cancelling insurance, first contact your financial adviser to see how you can reduce your premiums or look at more affordable cover options,” says Nel-Fouché.
- When in doubt, contact a financial adviser:
The world of personal finances can be more complicated than many households are prepared to accept. Nel-Fouché says this pandemic has forced us to acknowledge our powerlessness in many respects; sometimes that pertains to control over our own financial situations.
“We should never be ashamed or hesitant to seek advice,” says Nel-Fouché.
“Financial advisers are knowledgeable about the nuances of personal finance and can help you find solutions tailored to your unique needs and circumstances.”
- Have a legal and executable will in safekeeping with a reliable executor:
Perhaps the most poignant, and devastating, lesson this pandemic has taught us is that we are not going to live forever.
“If your time comes tomorrow, is your family going to be taken care of? Will they get time to grieve, or will they be swept away by a tide of financial loose ends?”
Creating a stable financial footing for your loved ones after you pass away is within your ability.
More than 94% of financial advisers agree that a will, with provision for winding up your estate, is a critical component of any comprehensive financial plan and the emotional cushion that your family will need in a time of great sadness.
None of us can say for certain when the pandemic will be behind us.
Nel-Fouché says this is all the more reason to apply the valuable financial lessons we are learning now and keep them going, no matter what the post-pandemic ‘new normal’ is going to be.
