Feeling the Pinch in Lockdown

While much of the news and conversation around the impact of COVID-19 seems to be quite high level, we are having very honest, one-on-one, conversations with our clients. Most people are facing real challenges, ranging from financial stress as a result of reduced income to emotional stress or anxiety from trying to balancing working from home with young children. Every scenario is different, so we urge you to communicate openly with us as your personal circumstances change.
 
A crisis like this highlights the importance of having a plan. On the road to reaching our financial goals we will come across many obstacles.  To overcome these, we need a plan, and we need to stick to the plan. As John L. Beckley said: "Most people don't plan to fail, they fail to plan."
 
We urge you to consult closely with us before making any decisions that will impact your financial position or add additional risk to your personal balance sheet. When prioritizing investment decisions, we always advise to first pay off non-tax deductible high-interest-bearing debt (credit cards, personal loans, expensive vehicle debt etc.) and then to build up an emergency fund (not in a Tax Free Savings Account) to between three to six months’ worth of basic expenses. It is for times like these that we advise this progression.
 
For many, the next few months will present major challenges. For some, it will provide opportunities. If you are fortunate enough to still be receiving your normal income and have short-term debt or don’t have a sufficient buffer for emergencies, now would be a great time to act on that with urgency. If you are still receiving your normal income, don’t have short-term debt, and have sufficient cash reserves, now is a great time to invest at discounted prices.
 
If you are already under pressure financially and need to cut back on expenses, a helpful process to follow is to track every Rand you spend and where you spent it. There are apps that can help, or you could use an Excel spreadsheet, or just write it down in a book. Knowing where every Rand you earn goes will be a huge help when you have to make difficult decisions around cutting back on certain spending. The key is to cut back without completing destroying your lifestyle.
 
So, how can we help? We can help you work through your budget and provide objective advice around where to cut back or prioritise spending. Investments that we structure for our clients are flexible. Most are able to facilitate a pause on contributions without costs or penalties. Some insurers are offering temporary premium relief with limited or no underwriting to reinstate benefits at a set date (it must be understood that, during this time, benefits are reduced), some medical aids are offering for contributions to be paid by positive, pre-funded, medical savings accounts. If you need to make use of any of these relief methods, please get in touch.
 
In good health,
 
Jonathan Theunissen, CFP®
Financial Planner