New ways to manage a low income as Covid-19 continues to hit our economy
If there is one thing we as consumers will learn from the current crisis in which the world finds itself, it will be how to better manage the money we have, particularly among those of us who may encounter a severe loss of household income.
This will affect our buying habits across the broadest spectrum, from the food brands we select in supermarkets (possibly moving from well-known to house brands), to the future purchase – or not – of any of our household goods.
But first we need to understand that it will take a while to recover financially, even when the lockdowns end. Plans need to be put in place not just to manage the here and now, but the future, post Covid‐19.
This means learning to live on less through careful budgeting (for many of us, for the first time in our financial lives), cutting back on expenses and, above all else, managing our credit.
This will require a careful re-assessment of what we actually need versus the nice‐to‐haves, and will more than likely lead to a significant change in our buying habits and the ways in which we purchase products. And it will affect everything from the perishables we purchase and money spent on leisure activities such as eating out or going to the gym, to big ticket household items ‐ the latter often bought in the past on expensive credit.
“This does not mean that people need to give up everything that gives them joy or makes their lives easier,” notes Aimee Miller, Sales and Marketing Manager for Teljoy.
“But they do need to adjust their views on what they buy to how they buy.”
Consumer‐oriented societies are fixated on ‘ownership’, notes Miller, a factor that often results in the aforementioned expensive credit as we sign up for account after account, and get ourselves ever deeper into debt, just so that we can purchase things.
Apart from the hidden costs of such credit – a cost which many consumers don’t take into account when they draw up their monthly expenses – consumers run the risk, especially now, of defaulting on their payments and ending up with poor credit records or judgments against their financial profiles.
“Or, if they can only afford part of their monthly installment, there will be added interest on the outstanding balance, extending the payment period even further and creating even more financial hardship,” notes Miller.
Rent‐to‐own models provides customers with the flexibility to not only upgrade but – even more importantly in light of Covid‐19 when so many people find themselves under unexpected financial pressure – downgrade or even cancel their rental agreements, without any of the usual penalties associated with conventional hire purchase agreements.
“Which means that if a household suddenly loses income, it can simply cancel their rent‐to‐own contracts and return the unit without embarrassment, explanation or risking damage to their credit profile,” says Miller. “Alternatively, if they can afford something, but just not as much as they were previously spending on rentals, they could downgrade to a more affordable unit, whether it’s for a television set, a washing machine or even a computer, and then upgrade to a more sophisticated model when their finances allow it once again.”
“We have no idea what the future holds,” says Miller, “except to know that our ‘normal’ has shifted and we all need to be better prepared for whatever that future may bring.
“We believe we will see a great deal of movement towards options that enable more flexibility for consumers. Collectively, we need to all learn new behaviours to future‐proof ourselves and safeguard the financial stability of ourselves and our families.”