By: Tessa Verwoerdt, Head of Department in Money Solutions
Bayport Financial Services
By now we all know that most of us living in South Africa will be confined to our homes for most of the time over the next three weeks. Covid-19 lockdown is real. We also know that the economy will take a big hit. But could there be a benefit to your personal finances? We think so.
There are two main ways in which the lockdown can save you money: the first is through expenses that you won’t incur, and the second is through the time you can use to optimise your finances.
Let’s look at straightforward savings. You are no longer commuting to work every day, and weekend outings are off the cards for now. This means you save on public transport or on filling up and running your own vehicle. Depending on how far you usually travel every day, this lockdown period can also push out the timing of your next service or change of tires by a month or so.
Many of us regularly spend money on eating out, getting takeaways, having a few drinks during happy hour at the pub, going on date nights or seeing a movie. There are also the more extravagant outings, such as live concerts or weekends away. Unless you already track your monthly expenses, you might be surprised to see how much money you are not spending when you stay home.
Going out often comes with a new outfit or a trip to the hairdresser or nail bar. Not doing these things will save you money.
You can also use this period of isolation to understand what you really need, and what you only want. When you can’t just run to the shops every time you think of something, see it as an opportunity to learn more about what you can live without. Knowing the difference between wants and needs is a critically important money skill.
Now let’s look at the financial advantages of having time on your hands. It would be real waste if all you do these next three weeks is play videogames, scroll through social media or watch movies and boxsets. Instead, schedule an hour or two every day to spend with your finances.
Here are some quick wins to get your money matters into better shape:
- Sort through your bills. Give yourself an hour to look at what payments leave your bank account every month and double check that a) you know exactly what each one is for, b) you still need the product or service, and c) if you couldn’t get it cheaper elsewhere. There is a very good chance that you will save yourself a lot of money just by taking a critical look at your bills.
- With an updated picture of your expenses, update your budget to reflect the change. If you don’t yet have a budget, use this time to draw one up and get yourself into the habit of recording your expenses against your budget.
- Next you can and should look at your savings. With your budget in better shape, you are likely to have money left over to save. It doesn’t have to be much at first – getting into the habit of saving is the important thing. In fact, this time during which you don’t have some of your normal expenses is a great opportunity to start saving.
- Sort (and sell) your junk. Use the time on your hands to make some space and even some money. Find stuff you now longer want or need, fix the bits that need fixing or just give the items a good clean, and advertise on sites like Gumtree or Facebook. Remember, you won’t be able to conclude the transaction while everyone is under lockdown, but you can get your marketing going and connect with potential buyers.
- Prioritise some pension planning. Do you know how prepared you are for retirement? Yes, it is a scary question to consider, but once you have the answer you can make plans if you need to. For instance, if you are in a workplace pension scheme, ask for more information or look through your paperwork to find out what you are paying and whether your employer would contribute more if you also paid in more. A bit of planning and clever decision making now, will make a huge difference to your financial wellbeing later on.
This lockdown period is an opportunity not to be wasted. We don’t know what the future holds, but times are likely to get tougher post-coronavirus before they get easier. The smart move, therefore, is to get your finances in order and to prepare as best you can.