Walking the Talk to Financial Recovery

Your financial well-being is likely to have suffered during the pandemic. Elize Botha, Managing Director of Old Mutual Unit Trusts, shares five simple steps to review and rebuild your finances.

Recently there was a post which said, “We’re now on day 480 of a 15-day lockdown.” Injecting a bit of humour is something South Africans are good at, even in this dreadful situation that we never imagined would carry on like this. Indeed, it has been a long 18 months. From rolling lockdowns to the recent looting and civil unrest, the past year-and-a-half has dealt South Africans a series of financial blows – enough to throw even the most financially disciplined off-track. If you are struggling with your finances, know that you’re not alone.

On top of everything else, the impact of Covid-19 has reportedly been more severe on women, who face greater exposure to financial vulnerability. Even more so when they are also serving as caregivers for their children and extended family. Women already show remarkable resilience in so many aspects of their lives. They juggle parenting with a career or business and running a household. With the uncertainty of the school year, many have had to take on the role of home-schooling teacher too. Given all this, it’s understandable that some areas of life are neglected, and it’s often our financial well-being that suffers most.

BACK ON TRACK

Staying on track with our financial and investment goals as we navigate this uncertainty has been tricky. In times like these, it can be overwhelming and difficult to know where to start and how to go about “rebuilding”. However, we must remember that it’s not about how many times you fall but how many times you get up again that counts.

Here is my step-by-step guide to getting your personal finances back on track:

· Take stock of your “new normal”

Review what you have (savings and investments) and what you owe (debt). Taking stock is always the crucial first step in any financial planning exercise. Once you have a clear picture of what’s “in the bank”, you can start to adjust. This is key to financial success, which depends on mastering the art of spending less than we earn and investing the surplus. Also, make sure you have some money in assets such as unit trusts that will grow your investments to outpace inflation.

· Make bold changes if needed

Chances are you’ve already cut back on non-essential spending. You may even have had to use your emergency savings or sold some of your unit trust investments. But keep your eye on your goal of financial freedom. As you re-evaluate your financial priorities, keep in mind that uncomfortable changes and personal sacrifices can lead to unexpected positive shifts in your finances. It’s important to fully commit to a phase of rebuilding to secure the standard of living you desire in years to come.

· Start that side hustle

A smart move is to diversify your income by having more than one way to earn money. That side hustle you’ve been talking about for years. Start it now. By being less reliant on a single source of income, you can create a valuable buffer. This can help you to make up for income gaps and ensure that, regardless of the economic scenario, your financial future is still secured. If you are already in an awkward position financially, remember that you have the power to turn your situation around. Draft a plan for yourself, take action and stay the course.

· Save and invest

The first step to saving and investing is paying off your high-interest debts – such as your overdraft as well as store and credit cards – which may have been necessary to take on during the past year. Think about putting some money back into your unit trusts. You can start small by using a savings account that rewards you, such as the Old Mutual Money Account which automatically allocates some of your spend into an Old Mutual Money Market unit trust.

A unit trust uses the combined money of all the people who have placed their money into it and invests this in a variety of asset classes (such as bonds, property and local and international shares). The money that you invest in a unit trust is managed by investment professionals. In this way, your money works for you without you lifting a finger! You can open a unit trust investment for as little as R500 a month – go directly online via the Old Mutual secure site or speak to your financial planner.

·         Advice is readily available

With the growing use of digital services, financial advice has also been streamlined so that it can be delivered directly to your phone, computer or tablet instantaneously. If you already have a financial plan that you have set up via an online advice tool, now is the right time to review it to ensure that it’s still in line with your refreshed financial and investment plans. Or book an appointment with your financial planner to update them on any life changes and get guidance on your plans to rebuild.

THERE’S NO TIME LIKE THE PRESENT

Without a clear goal, most people will find themselves spending rather than saving. Every person is unique, and our relationship with money is often complex. An understanding of your personal values is also essential in order to find what motivates you to achieve financial freedom. When we’re working towards something that is important to us, we tend to be more willing to work harder to reach our goal.

If Covid-19 has shown us anything, it’s that the world can change overnight. Things that we took for granted – hugging a loved one or shaking a stranger’s hand – are no longer an option due to social distancing. Yet we need to be able to thrive both personally and financially, whatever the world throws at us. This kind of resilience can only be achieved through proper planning, and the good news is that it’s never too late to start.