The catastrophic economic effects of the global Coronavirus pandemic has highlighted the need now, more than ever before, for careful personal financial management.
In the face of the pandemic, Al Baraka Bank Financial Advisor, Ayesha Haffejee, has stressed the need for people to undertake a financial re-think, given that business closures, retrenchments, short-time and temporarily reduced salaries are wreaking havoc with people's personal financial commitments, leaving many unable to meet their financial obligations.
"The virus effectively stalled economic activity globally and with that job losses and pay cuts ensued. Few were adequately prepared for the financial implications. Some were lucky to retain their positions, whilst many faced business closures or retrenchment. Middle-class salary earners have been heavily impacted as they rely on their monthly salaries to pay rent, bonds, life cover policies, savings policies, short-term insurance for home and vehicles, mobile phone bills, utilities, groceries, domestic wages and petrol expenses. Likewise, the lockdown placed a heavy burden on employers to make difficult decisions about cutting salaries or retrenching staff," she said.
"Personal budgeting and making budget revisions are now of paramount importance in order to maintain a degree of financial wellness in the face of some of the toughest economic times in South Africa's history. Slashing monthly expenditure to cover only the bare necessities is advisable. The economic effects on people is ongoing and will be long-lasting," she stressed.
The bank's Marketing Manager, Yunus Paruk, said: "With lockdown now eased to level three, now is an appropriate time for consumers to review their money and financial plans, considering the changing economic landscape brought about by the pandemic .
Effective budgeting under current economic circumstances requires a robust approach and the ability to identify and prioritise only the most important needs.
"Budgeting in the face of a pay cut or zero income means making huge sacrifices. The first thing is to negotiate keeping a roof over one's head, revising payment terms or securing payment holidays. This is usually one's biggest expense and by securing a reduced payment structure will immediately bring some relief. Thereafter, check with financial institutions regarding stopping debit orders on savings policies," Haffejee said.
She also said these tough times should be used to look at other personal expenses and to cut unnecessary elements. She suggested looking at data packages and mobile phone bills, giving consideration to securing more competitive deals post-lockdown.
Paruk, indicated the need to carefully manage money. "We must adapt to these challenging times and stretch available funds to survive the prevailing conditions, being prudent by considering needs rather than wants. We all need to focus on basic and essential expenses."
He added that it was possible to find positive aspects, encouraging people to review their spending habits. "We must align spending habits to focus on essentials rather than wants, prioritising expenses which are of short, medium and long-term value to ourselves, inclusive of emergency savings, education savings and retirement savings."
He suggested people introduce a system of continually cutting unnecessary or low priority needs and said people should look to sources of financial advice and information capable of strengthening financial wellness.
"Now is the time to exercise caution in making major financial decisions. Be disciplined and realistic as to the affordability of purchases and only spend within one's means to minimise debt.
"Once the situation stabilises, both those who took pay cuts and those retrenched during the worst of the pandemic should again look at their finances and consider engaging with a Financial Advisor to see how to create greater wealth and liquidity in situations where less or no income exists," Ms Haffejee said.