How should you approach your finances during and after the Covid-19 pandemic? Expert weighs in

Financial Planning
Financial Planning
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    • The Covid-19 pandemic has had serious effects on everyone’s finances.
    • Reviewing how you budget and bank can make a huge difference.
    • Senior financial adviser and marketing director Mkhonto Gozongo explains why it may be beneficial to get a financial adviser.


    The Covid-19 pandemic has left the nation in shock and has caused an upheaval in many people’s live. One area that has been heavily affected is finances, and there's a good chance  financial-planning conversations may go differently and more difficult than it would have been under “normal” circumstances. If you’ve extensively been doing your research on how you can best manage your money, or if you’ve inundated your financial planners with calls and advice during the pandemic, there are many factors to consider.

    DRUM spoke to senior financial adviser and marketing director at Mlibo BlueStar Financial Advisory Services Mkhonto Gozongo, who answered some questions about how people can best manage their finances.

    He advises that approaching finances during this time should start with taking a closer look at one’s budget and banking.

    “This will assist you to get a bird’s eye view on your monthly expenses and spending habits. You might need to create a new adjusted budget that is based on your current financial circumstance. 

    “Take a look at debit orders and auto-renewing subscriptions you may have and assess whether there are any non-essential expenses you will be able to cut back on. Also make sure to check the T’s and C’s for any cancellation clauses or penalties before you hit pause.

    “Communicate with your creditors to make payment arrangements when you can’t pay. Ask them if they have the option for you to be on a payment plan or on a reduced interest rate plan. It's much better to make this call before you miss any payments,” Gozongo says.

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    If you are considering getting professional advice, a financial planner may be your best bet.

    The role of financial adviser is to provide guidance and assist clients to make informed decisions regarding their goals and needs in their current life cycle. We follow the six steps of financial planning to provide a full financial-needs analysis to assist clients in making those difficult decisions. It’s not only about insurance products but also debt management and educating our clients on financial wellness,” Gozongo  says.

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    An emergency fund is a big part of financial planning, it’s good to have one and you can start one if you are saving more on certain expenses during this lockdown. “If you are disciplined, you could have as much as five times your salary saved in an emergency fund. This would come in handy when facing things like lockdown, cutting of salaries, retrenchments and any real emergency. As your spending habits change during this time, you will probably be cutting back in areas, like entertainment for the kids, clothes shopping or visiting the hairstylist,” he says.

    “If you are disciplined you could have as much as five times your salary saved in an emergency fund”
    Gozongo

    “Take the amount that you would normally spend on these activities, place it in a savings account and forget about it. This will not only provide you with a buffer during these uncertain times, but can also help to build up savings for future emergencies,” Gozongo advises.

    The Covid-19 pandemic has had a dire financial strain on many people’s  finances, however it is advisable to contact your financial adviser or ask for financial advice before changing or adjusting any financial plan.

    “Premiums remain the same across the board, the only changes are payment-relief measures to assist clients that are in need and assisting them to preserve their policies. All product providers have different relief measures in place, some are providing premium holidays and the option of reducing benefits during this period with the option of increasing it again after lockdown. The conditions of those relief measures should always be understood, you need to know how it will impact your plan or any claims that could arise during lockdown,” he expresses.

    If you’re thinking of taking advantage of financial relief, take into mind your individual circumstance. If you are financially stable over this period, you might not need to make use of the relief measures.

    “Keep in mind, when it comes to debt, most companies provide premium holidays during this period but the interest on the outstanding balance still accumulates every month as they all have T’s and C’s. If your income has been affected during this pandemic, then make use of the relief measures, just make sure you fully understand the T’s and C’s with regards to your debts,” he cautions.

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    The pandemic also presents us with an opportune time to start planning for more long-term things such as retirement or to look at premiums.

    “There is no one-size-fits-all scenario when it comes to retirement funds as there are a variety of options available such as for some it could be the right time to increase their contributions, for others maybe it’s time to consider a later retirement date. People planning to retire now should consider factors such as what their income will be, how the market will affect their income, what happens to their funds in the event of death or critical illness such as cancer or Covid-19 diagnoses and how much tax will be paid,” Gozongo says.

    It may be a tempting or necessary to dip into savings, however Gozongo shares that there are a few things one will have to consider before doing this. “Some savings and investments are meant for short-term saving such 0-5 years and 5 years and more. Everyone needs to keep in mind the reason they started those investments or savings. Some were started to provide for a child’s education and others had a specific goal in mind such as deposit on a house, wedding expenses or a holiday.

    “Using money from savings and investments is much better than taking a loan and incurring more debt, but it has to be the last option as an emergency Always consider the penalties when dipping in as certain savings and investments carry less fees than others,” he adds.

    “I think in most cases it’s just the fear of the pandemic that has ruffled some feathers in the beginning, we didn’t know what to expect and many people were in fear of their jobs. This resulted in many requests regarding relief measures or access to saving funds.

    "More recently most clients at this stage of the pandemic have made peace with the new way of life. Thankfully, the government has allowed for some economic growth by allowing most sectors back to work. All we can do is continue with life as it is and ensure you make use of all the safety regulations and requirements,” Gozongo ended.