More often than not, it takes a tragedy or sudden uncertainty for us to realise we may not be adequately prepared to cope financially. The latest Momentum UNISA Household Financial Wellness Insights Report shows exactly this, with COVID-19 and its necessary but fierce lockdown providing a financial wake-up call for many South Africans.
“The hard lockdown was a splash of cold water for many South Africans,” says Janine Horn, Financial Planner at leading financial services provider, Momentum. “The analysis shows that households’ interest in certain financial activities like financial planning only increased when they realised that they were facing an event beyond their control or one which they might not have provided for sufficiently.”
Horn was speaking off the back of the latest episode of the VIA money show Geldhelde, where Deputy CEO of Momentum Metropolitan, Jeanette Marais dug into the importance of financial planning. “The report showed that initially, the interest in personal budgeting and financial planning was low. People expected lockdown to continue for about three weeks. When the realisation set in that this will become a long-term reality households’ interest in budgeting and financial planning increased,” says Horn.
But she adds that, worryingly, the interest decreased gradually as the lockdown rules were relaxed, the economy opened for more business, and more people returned to work. “The report also shows that people who actively pursued their financial plans fared far better through the challenges COVID-19 brought, and are likely to be back in the driver’s seat again, taking responsibility for their own lives,” says Horn.
She says this confirms Marais’s sentiment that it goes without saying that we need to have a plan for when we may get derailed in our financial journey. “Those who plan for success rather than scramble to get their finances in order in the face of uncertainty usually have sufficient resources to ride the storm,” says Horn.
“Importantly, these same long-term planners get right back on track with their financial plans and goals as soon as the situation normalises,” she adds.
To take control of your financial wellbeing is to control those parts of your life that are manageable. “To move your life from “financially scared” to “financially sound” through unexpected events, create a map of your goals and achievements that you stick to like your life depends on it. It often does,” says Horn.
Horn shares her advice for success and how to get money wise:
“At Momentum we believe that there are 7 habits that can enable you to successfully weather any financial storm, and never let speedbumps deter you from achieving your aspirations,” says Horn.
1. Map out your journey with measurable goals and a plan to achieve them. Be specific and realistic about short-and long-term aims.
2. Maintain your momentum by knowing where every cent goes.
Sticking to a monthly household budget is the best way to guarantee that all bills are paid and that your savings are on track. By keeping track of what you spend, you may be surprised when you see how much you spend on daily coffees or lunches, clothes, or even data.
By tracking each cent, you reinforce your financial goals and limit the temptation to splurge on wants instead of saving for your needs.
3. Cover yourself for rainy days. Empower yourself by saving a predetermined amount each month for those unexpected financial emergencies. The general rule of thumb is to have enough emergency funds to support you for three to six months should something unexpected happen, such as retrenchment, illness, or a lockdown. It’s never too late to start saving. No matter how small, start with something.
4. Make the bold choice to invest. Historically, there has been no better way to grow your money than through investing. While investing may be risky, in many ways, choosing not to invest is even riskier.
5. Don’t let speed bumps deter you. Whether it’s getting out of debt one small repayment at a time, or learning to right previous financial mistakes, each step forward in your journey is a success in its own right.
6. Learn to be financially smart and streetwise. Knowledge is the best defence against those who prey on uninformed individuals to sell get-rich-quick-schemes. Keep up with financial news. Review all applicable tax legislation changes each year to ensure that you can take advantage of any adjustments and deductions.
7. Diversify your income sources. When you have multiple income streams, losing one is not the end of the world – or your financial wellness plan.