Thursday | 28 May | 2020
By: Essie Bester
The effect of Covid-19 and the continuously changing behaviour expectations surrounding it as well as intense instability in money markets have left many families concerned about their work and finances. However, things aren’t as out of control as they may seem. There are concrete shifts that you can make to protect yourself financially.
- Firstly, investigate your attitude towards money
Your attitude towards money determines how you make important financial decisions and this could have a big influence on your ability to reach your goals. Experts say our emotions, self-worth and feeling of security have an enormous influence on the way in which we handle our money. Especially in emotionally loaded times such as these, when your feelings of shame regarding money – that intense painful feeling because you believe that you will never be able to make good decisions regarding money – hover just below the surface.
Do you now chastise yourself because you didn’t start an emergency fund months ago? Or do you question the huge career change you made earlier this year?
Compose yourself for a second while you review your anxiety and fear regarding money. Ask yourself the following, “Does it help in any way to belittle myself about wrong money decision I made in the past? Could I have known beforehand that this crisis would take place?” Remind yourself that you do in actual fact possess the skills and the ability to reach the goals you desire. And that you are doing your best. Develop a positive money mantra that can be of service to you.
- Consult your emergency fund
One of the most important pieces of money advice you can receive, is that you should establish an emergency fund (that can cover at least three months’ but preferably six month’s expenses). In situations such as this it is of inestimable value. Yet there are many individuals who don’t put away extra money to fall back on.
If you have an emergency fund: How much have you saved? How does it compare with your monthly expenses? If the money that you have saved for an emergency was based on an inflated budget, you most probably have space to get by with it for longer, but then you have to start cutting back on your expenses.
If you don’t have an emergency fund: Firstly, become acquainted with your attitude and give yourself some slack. You cannot go back and change the past, but you still have options. If your work situation is stable (even if just for now), you have to start looking at ways in which you can save in the coming weeks. Start setting aside money immediately to begin building even a small emergency fund.
If there is a possibility of lay-offs at your work, you should immediately start investigating other income opportunities that could carry you through this period. Also investigate the options available for families who are being affected financially by Covid-19. More about this at: https://grantspace.org/resources/knowledge-base/covid-19-emergency-financial-resources/
- Review your budget and focus on the most important issues
It is important to know where your money goes to. How much do you really spend every month? Are there expenditures you can cut? Draw up a budget, based on just the most essential. Now add only the expenditures that are important to you. This exercise makes it easier to determine which expenditures you incur purely out of habit or social pressure. Be mindful of the triggers that cause you to spend more money.
Don’t make big changes to your investment plan because you feel panicky. Focus on your long-term goals. If you aren’t compelled to sell your investments to cover your daily expenses, it’s a good idea to simply wait for better days.
Those who feel financially stable, have put away sufficient cash, and have the budget to increase their monthly investments slightly, can do so. Although cash looks like a safe option in the short term, history shows that almost all other asset classes will do better in the medium to long term.
Even in a full-blooded bear market such as the one we are currently experiencing, there are good investment opportunities for those who are prepared to set aside emotion – especially in a bear market. Prices are lower than they were six months ago, and although no-one knows where the turning point lies, it is improbable that you will harm your regular monthly investments in the long term.
Weak economies are inclined to bring out the worst in people, and the Covid-19 pandemic has already delivered its share of chancers, opportunists and fake news distributors. Fraudsters often use the names of reliable and well-known institutions to make people believe they are legal. If you are offered a transaction or investment that sounds too good to be true, you should know it is a scam. Consult a reliable financial advisor or visit the institution’s website and contact them directly. In times like these it is important to not only make good financial decisions, but to also think clearly.
Remember that the economy and market will recover again. In the meantime, you now know what you have to do to improve your financial health. Take care to come out at the other end with healthier money habits – ready to let your money grow.
* All information was correct at the time of publication.