Has lockdown impacted your income? Here are a few tips to help you
Every single person in South Africa has been impacted by the Covid-19 pandemic in some way.
For many people, working from home has become a reality. You might be one of those who is fortunate enough to still be drawing a full salary during the lockdown and you might also have experienced a decrease in your cost of living because of savings on fuel, living and entertainment expenses.
Conservatively, let’s assume that on average you spend R500 a week on entertainment, which would include going to the movies, fast food, eating out, and drinks with friends.
If you drive a car with a 45-litre petrol tank it will cost you R534.15c every time you fill up your car. If you fill up your car on average four times a month that’s R2136.60c. Let’s for argument’s sake say you are filling up your car once a month under lockdown. That’s a saving of R1602 a month on petrol.
If your vehicle is insured with Standard Bank you will be receiving 25% of your premium back in cash during the lockdown. On an insurance payment of R500 a month that’s R125 a month.
Interest rates have dropped by an unprecedented 2.75% this year – so on a R1 million, 20-year bond you are saving R1440.73c a month.
If we add that all up, you could hypothetically be saving R5167.94c a month during the lockdown.
So, what should you be doing if you find yourself in this situation?
Start with shrinking your debt:
If you can, pay off as much debt as possible. Start with your most expensive debt. Not the biggest, but the one which costs you the most in interest to pay back every month. These are normally in the form of credit cards, clothing accounts or unsecured or personal loans. The quicker you can cut down that debt the longer you will feel the effects after lockdown.
If you manage to pay off one of your debts in the lockdown period, strongly consider rerouting the original instalments into repaying a different debt using the same hierarchical interest rate system.
All the advice you would have received about debt before Covid-19 remains relevant now. Do not bury your head in the sand and ignore your debt, hoping it will go away. If there is a specific debt which you have been struggling to see the back off Covid-19, ironically, might be the best time for you to start paying it off.
Save, it’s already a rainy day:
Paid up your debt? It’s natural for anyone to want to spend any extra money they have, especially in a time of crisis. Comfort shopping is a human, but right now the best way to deal with your anxiety is to ignore those impulses and to build up some savings. No-one knows how long our current situation will last and, while you are working now, your employment or salary could be compromised in the future.
There is a wealth of savings vehicles available to meet your goals and risk profile. A financial planner can give you the necessary financial advice to help you with choosing the appropriate one for you.
Donate some money:
One of the most rewarding things about building wealth is the ability to share some of it for the betterment of society. If you can afford to support one of the organisations which is helping to either fight the spread of Covid-19 or which is providing shelter or food for those in your community, then you should strongly consider doing this.
Only do these things if you can afford to, not in a manner which compromises your lifestyle; the virus has done enough of that already. The most important thing is to avoid being rash with any additional income which you might have during this period. Remember, you are fortunate to be in a position that many other people are not, and you owe it to yourself and your family to be responsible during this time of uncertainty.
Sonto Lemeko is the Head at SBFC Voice and Digital.