As a result of the Covid-19 pandemic and the resulting knock to the global economy, hundreds of thousands of South Africans have been forced to review their financial health and budgets.
An untold number of hardworking South Africans have experienced salary adjustments. Some companies have had to retrench staff while others have had no other choice but to close their doors. Although various service providers have offered debt relief or payment holidays over this period. What does one do when their income has decreased yet their expenses or monthly payments have stayed the same?
DRUM spoke to hospitality worker Joyce Ngqulana* who shares how she first had to adjust to the UIF amount they were given, and is now having to make more changes as her salary is still lower even though they are back at work.
"When the president said restaurants can reopen, I was so happy. I really thought that maybe financially, my employer would be in a better position and still be able to pay me my normal salary," she says.
"I know I was dreaming, but I still had hope. First when we weren't working, they did the UIF for us and it helped. Even though it was about half of what I used to earn, I was able to pay my accounts, some debts I owed and purchased groceries in bulk for my family. But I’m living on a paycheque to paycheque basis now because when the new money comes in, I have debts to settle and accounts to pay. When we started working again, my employer consulted with us and told us we’d be taking pay cuts." Joyce shares.
"I've had to really reconsider some of the things I do with my salary. At my stokvel we’ve lowered our monthly contributions, I’ve also cancelled a few things here and there and I was able to pay my clothing account off in May but I am still adjusting to not being as financially comfortable as I used to be."
*Not her real name.
Alfred Ramosedi, CEO of Bayport Financial Services, advises consumers who’ve had salary adjustments on how to assess their financial situation and what steps to take to get back on track.
“Consumers are facing debt and personal finance issues unlike any they could have imagined. A few months ago, no one could have envisaged the immense pressure the world’s economies now face. We all need to adapt to a new reality,” he says.
“One area that will certainly need to be relooked is the impact that Covid-19 has had on debt management,” he adds. Ramosedi advises consumers to start by assessing their current situation.
Ramosedi says to follow this seven-step model to regain control over your finances:
1 Know your financial status
Find out as much as you can about your current financial status to allow you to make the necessary decisions and changes. Most information is easily available on your payslip and bank statements. Your payslip will show your gross income and take-home salary, whereas your bank statement will tell you more about how much you spend, and on what.
2 Question the “as-is”
Take a closer look at the information you’ve gathered, then ask and answer these critical questions to deepen your financial status understanding.
? What are my financial obligations?
? What is my debt status and credit profile?
? Can I meet my financial obligations?
? Is my monthly cashflow positive or negative?
? How much financial freedom do I have?
? What are the benefits of lower interest rates?
? Is it worth taking advantage of payment holidays and debt consolidation loans?
? Do I need to sell assets? What are my assets worth if I sell them now?
? Which actions will make a difference?
3 Prepare to change
Now that you have intimate knowledge of your financial status, you must prepare for change. Change can take different shapes depending on the individual’s financial status.
4 Decide on a course of action
This is about aligning your existing budget to your current situation. Ramosedi says now that your income has decreased, you cannot continue to spend as if nothing has changed.
With the new numbers in front of you, the new reality of your financial situation should be clearer. It might not be a pretty picture but seeing the picture clearly empowers you to put plans in place.
5 Identify potential responses
Now that your restructured budget shows where there should be adjustments, you need to distinguish between essential and non-essential expenses. Should you cancel a membership or policy? Do you really need that premium subscription? There are other interventions, like debt consolidation, where you pay one lower instalment for several recurring payments.
6 Consider the impact of each response
Track your expenses against your budget and make the necessary adjustments as you go.
7 Implement the action
This is about discipline and long-term financial wellness and being able to consistently implement the measures you’ve put in place to control your finances. Stay the course – once you have committed to an action plan, stick with it.
By following these steps and being disciplined, Ramosedi believes that consumers will be in a better position to take charge of your financial situation.