10 Things COVID-19 taught us about how we think about wealth and money

Published on 23rd June, 2020 at 08:07 am

For all the uncertainty and tragedy the crisis has caused, COVID-19 has taught us some valuable lessons when it comes to our money and planning for life’s uncertainties. Use these lessons to rethink your own financial planning.

COVID-19 lesson #1: Don’t put all your capital in the same basket

If you didn’t have an emergency fund before the economic crisis of COVID-19 hit, or the balance of yours wasn’t enough to tide your family over, the crunch highlighted the importance of balancing your investments between tax-effective, long-term retirement vehicles vs accessible cash savings.

Long-term investments and savings designed for goals like retirement not only aren’t easily accessible if you’re in need of cash, but they also aren’t recommended to dip into if you’re struggling with cash flow.

What we’re doing differently

While investing is an important part of your long-term wealth plan, don’t underestimate the value (necessity, really) of building an easily accessible emergency savings fund for when life dishes you a harsh, unexpected blow. Whether it’s a short-term inconvenience, such as car repairs, or a longer-term difficulty such as retrenchment, you’ll thank yourself for having put away cash regularly for a rainy day.

Our savings calculator is just the tool you need to get on track to your savings goals. Use it now to find out how much you need to put away monthly to be prepared for life’s surprises.

COVID-19 lesson #2: Get your estate in order

Before coronavirus and its related health and safety precautions became part of our new normal, severe illness and mortality probably didn’t cross your mind that often. The devastating health impact of the pandemic has not only left some families grieving the loss of a loved one, but sadly also impacted them financially too, as happens when a household income earner passes away. This has changed the way we think about what happens to our loved ones if we were to pass on. The key learning? It’s important to think the unthinkable and ask yourself: what happens if I pass away?

What we’re doing differently

It’s a bitter pill to swallow, but COVID-19 reminded us that the likelihood of you getting sick or passing on isn’t as low as you think it is. Be prepared for the latter by making sure your estate is up to date by drawing up a will, or reviewing it if you already have one. Discuss changes with your financial planner, to ensure the right people are cared for when you die. Read more about this here.

COVID-19 lesson #3: Don’t be caught without cover

Life cover, income protection, and disability and severe illness cover… they’re all expenses we treat as nice-to-haves, or even luxuries. But if there’s a financial truth COVID-19 made clear to us, it’s that risk cover is the safety net we all need to ensure our financial wellbeing.

What we’re doing differently

Do you have unsettled debt, or a family of dependants? Life cover will help build liquidity into your estate and make sure your family doesn’t encounter severe financial hardship if you were to pass away.

What happens to your income if you are in an accident or fall ill? Find out if your employee benefits include income protection like severe illness cover or disability cover. If they don’t, speak to a financial planner about taking out this cover so you can sustain a monthly income while you’re unable to work.

Reality Plus and Health members get a discount of up to 30% off risk products including life cover, disability cover and income protection. Learn more here.

COVID-19 Lesson #4: Be smart about debt

If you’ve suffered a pay cut or job loss as a result of COVID-19, you probably wish you could go back in time and think twice about your credit purchases, especially retail credit. The pandemic has taught us to think twice before signing away our future income when we really don’t know what tomorrow (or the next year) holds.

What we’re doing differently

Form healthy money habits to help you shake off the indulgence of maintaining your lifestyle on credit. This includes trying, where best you can, to pay cash for low-cost items instead of racking up retail credit. Put smart credit purchases such as property, student loans and vehicle finance ahead of smaller whim purchases that you can do without. Utilise lower interest rates provided for by the government cutting repo rates to pay down your existing debt as quickly as possible. See how to take advantage of these lower interest rates, here.

Read more about how to make responsible credit choices here.

COVID-19 lesson #5: Get serious about a passive income

Look at how COVID-19 put many businesses’ operations on hold, leaving millions of people uncertain about whether or when they’d see their next salary. The legal principle of ‘no work, no pay’ became a painful reality for so many, but this also shone light on the value a passive income can add to your cash flow in the long term, if you have the means to create a passive income.

What we’re doing differently

You may read ‘passive income’ and property investing springs to mind. This is just one of the avenues you can pursue to earn an income ‘passively’. If you’re interested in investing, look at getting your money into the stock market – but before you do, consider these expert insights about investing during a down market. Also, speak to an expert financial planner before you make decisions so you make the best moves possible.

Do you have creative flare? Sell photography or illustrations on a stock library, or earn royalties on your own musical compositions.

COVID-19 lesson #6: Spend wisely

Where before we knew in the back of our minds we could easily save up to R500 a month if we opted for home-brewed coffee over barista-made ones on the go, the luxury of that morning fix was just too difficult to give up. Thanks to lockdown, this along with other reductions in our disposable income spend has pushed us to truly realise the savings we can create if we apply a bit of discipline.

What we’re doing differently

Cash in hand doesn’t necessary mean cash to spend. Instead of finding other things to spend on, use the unique opportunity to take advantage of the drop in the repo rate by knocking down your debt and getting closer towards financial freedom.

If you do need to pay for purchases or services, make sure you’re paying the best price by asking your free 24/7 Personal Assistant benefit to source quotes within just 48 hours. Use it now. You could be over- or under-insured for everyday items such as your car, house or contents of your home. Use these calculators to ensure these goods are ensured at their true replacement value, to save you money and give you peace in the long term.

Here are some other ways to help you cope with bills and manage your money in tough financial times.

COVID-19 lesson #7: Regroup with your financial planner

There’s never a bad time to review your financial plan, but in times of indefinite uncertainty, meeting with your financial planner to discuss your cover and savings priorities is even more important. Perhaps your priorities have been reordered, or you need to hold off from saving towards that family holiday so you can cover your expenses for the next couple of months.

What we’re doing differently

A qualified financial planner is equipped to help tailor a plan to help you reach your unique investment and savings goals, while ensuring your cover needs are met. Who better to regroup with when it comes to life’s big financial adjustments? Even in a post-COVID-19 world, don’t lose sight of the value a financial planner can add to your short-, medium- and long-term financial goals.

Book a meeting with a financial planner today to formulate a financial plan to help you grow your wealth, even in tough times.

COVID-19 lesson #8: Nail budgeting

If you were lax about your income and spending as long as your rent or bond was covered and your lights stayed on, the financial impact of COVID-19 has probably turned that on its head. Like many others, you may have been forced to take a serious look at your spending habits and see what changes can be made to keep you afloat and improve your financial outlook.

What we’re doing differently

Whether your finances suffered a hard blow through retrenchment or a salary cut, or you’ve been fortunate enough to transition to working from home and are saving cash on the daily commute and bought lunches, budgeting can help you take charge of your finances.

During a time when it feels as though very little is within your control, budgeting is a skill and tool that puts the power back in your hands. It’s an empowering monthly activity everyone in your household can get involved in, whether it’s to save up to cover additional purchases that everyone will use, or to learn from each other how to manage personal finances better.

Here’s how to create a budget that works, with templates for you and your family to start budgeting together.

COVID-19 lesson #9: Be curious about your work contract

Retrenchment and lay-offs have become a reality for thousands of South Africans thanks to the downing of tools during the national lockdown. It sparked the question for many: what are my employee rights in a retrenchment? What information do I have access to about my employer and the action that’s being taken? We tend to gloss over the fine print in the excitement of signing employment contracts, but if this pandemic has taught us anything, it’s that we should understand what our employee rights and benefits are that can cover us when a career storm hits.

What we’re doing differently

Ask questions about what exactly that ‘group risk cover’ line item on your payslip entails, and the rules governing pay-out of this cover. Speak to your financial planner about retrenchment cover plans available to you, and any other cover you may need to ensure you and your family’s costs are covered in the event of a global crisis like COVID-19.

COVID-19 lesson #10: Don’t neglect your relationship’s finances

Besides the financial impact of lockdown, relationships were put to the test too. It was either a time to unite in the face of adversity, or an opportunity for adversity to drive a wedge between partners at odds.

What we’re doing differently

Money worries have been credited as the leading reason for divorce in a 2018 UK poll of more than 2 000 British adults, so dealing with these worries in a constructive way can not only help you tackle and eliminated financial stressors in your relationship, but can also draw you closer together with your partner. Read this for expert tips to help stop money from ruining your relationship.

No matter where you are on your financial journey, meeting with a qualified financial planner is an invaluable step in realising your unique financial goals. Book a telephonic meeting with one today to get on track.