Blueprint for surviving the downgrade

2017-04-20 06:00

The best response to SA being “junked” is to follow the advice of Rudyard Kipling and “keep your head when all about you are losing theirs”.

That’s the word from Berry Everitt, CEO of the Chas Everitt International property group, who says: “So much has been said and written about the S&P decision to downgrade SA’s investment rating to junk status, and the terrible consequences it could have for ordinary South Africans.

“But unfortunately most of it is thin on advice about what consumers can and should be doing to mitigate those consequences. We would like to help remedy that, and have thus come up with a few practical plans that people can start implementing right away.”

. Firstly, as in any negative situation, the best response is not to let the opinions or actions of others cause you to panic or to fall into despair.

“There are ways to cope with the economic fallout, but the key is to keep a cool head, move fast, and have the nerve to stick to your plan over the coming months.”

. If you have savings, keep only what is necessary in your “emergency fund” that is easily accessible, and immediately divert the rest - and any other money you can - to paying off as much debt as possible.

“This may seem like a radical move but one of the worst effects of reaching junk status is that interest rates are likely to rise, and that hurts most when you have a lot of debt,” says Everitt.

. Cut your household spending to the bone and actively work at putting every additional Rand that you can save or raise into becoming debt free as fast as possible

“Do whatever it takes, from making your own lunch for work and not buying anything new except food and other absolute necessities, to selling your second car and any other extraneous belongings, and do it soon, before other people are also all trying to sell things and prices take a tumble.

“Never feel embarrassed about re-evaluating every item in your budget and adopting an extremely frugal lifestyle when all your friends and family are still spending. Soon enough everyone else will be in the same boat out of necessity rather than choice, and they will probably be wishing they had been smart enough to take action when you did.”

. If you have a hobby or a “weekend business” that has been making you some extra cash, you should really nurture it now and try to find ways to grow your customer base and income from this source.

“Job loss is a real risk in a declining economy and you need to face up to this and think about having an alternative source of income if it should happen to you,” says Everitt.

“So if you or your partner already has a small business growing things, making things or fixing things, now is the time to take it seriously and put time and effort into it – especially if you are able to offer your products or services at good rates to others who are also trying to save money.”

. As soon as you have paid off your debt, you should stick to your frugal lifestyle and start saving again or investing, as much as you can every month, he says.

“By then, interest rates will have risen and you will be getting a better rate on anything that you can save. Alternatively, the price of anything that you would like to buy, from shares to additional properties, is likely to be lower. And we all know that the real way to make money is to buy low and then sell high when the market turns again.

. If you are a homeowner, you should not just panic now and immediately put your property on the market without some proper planning, says Everitt.

“Panic selling almost always results in owners losing a large part of the equity in their homes that they have worked very hard to build up. And that will not only restrict their ability to buy another home in the future but is also likely to damage their retirement prospects.”

. If you are renting, you should consider moving somewhere cheaper and /or closer to work, so that you can save on rent or transport costs (or both) and put that money towards paying off your debt and then saving or investing, he says.

. If you do lose your job, you should not let it damage your self-worth, health, or well-being, he says.

  • “Update your CV, post it on the employment sites on the internet and apply directly for positions you see advertised. Be open to relocating if necessary and also think seriously about starting or building up your own business.”

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