4 Tips to improve your financial health during challenging times

Published on 25th August, 2020 at 01:03 pm

When markets falter and uncertainty lies ahead, feeling in control can be tough to master. But sometimes it could be as simple as the mindset you apply – and taking some practical steps.

Kenosi Magosha, Head: Client Solutions Savings at Sanlam, says amid the challenges of a pandemic and resulting recession and nationwide lockdown, there is an opportunity to learn coping skills and be guided by a change in your perspective to focus on long-term financial goals.

Research by Decision Lab and Capital One has highlighted that during stressful or challenging times, focusing first on the bigger picture is a form of psychological distancing that could help with healthier financial behaviour and better financial outcomes over the longer term. This involves assessing the reason we might do something (financial goals) versus how we might do it. A systematic approach to tackling financial wellbeing is therefore required to help us with navigating finances during these times.

Here are important things that you could do to help with your finances and financial health:

Financial health tip #1: Don’t ignore your psychological health

Get help to manage and cope with stress, depression or anxiety. If not managed well, research shows that stress can affect financial decision-making and self-control, which can result in a vicious cycle of stress, and ultimately affect your financial health and outcomes. There are various ways to access help, ranging from employee assistance programmes, counselling benefits offered on some medical aid options, help from faith organisations, social support programmes and free support from organisations such as The South African Depression and Anxiety Group (SADAG) and The South African Federation for Mental Health.

Here are some tips for staying physically and psychologically healthy during these unprecedented times.

Financial health tip #2: Get a financial planner on your side

An expert financial planner can help you to set and review your financial goals, which has been proven to alleviate financial stress. With your financial planner, aim to work on a balanced financial plan in the context of your life, which can help give a sense of control. The plan should take into account the following: insurance, which covers everything from unexpected events to material possessions; saving for things you can’t plan for and insure against, along with future goals such as retirement and children’s education; and maintaining the ability to access affordable credit to buy appreciating assets. Make the most of your meeting with a financial planner by asking these questions.

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Are you battling to stay on top of bills during this time? Here’s what you can do to get help.

Financial health tip #3: Learn and adopt financially healthy habits

Just like we have to inculcate habits of regular handwashing, mask-wearing and social distancing, there are some financial habits we can work on to help with our financial health. These habits focus on things you can control in the context of your financial goals:

• Keep your goals in focus, e.g. saving for retirement, by reviewing them regularly with your financial planner.
• Set and manage a budget – this should include adopting frugal spending, and avoiding impulsive spending (which can be stress-induced) to help take rands further and see if you can free up money for an emergency fund. Zone in on your bank statement and your shopping list to understand and manage your spending habits better.
• Manage debt wisely by paying the same amount as what you were paying before the interest cuts – if you can – to accelerate the payment of your debt. Avoid using debt to pay for consumption.
• Avoid making financial decisions in moments of stress. A financial planner can help you with this, but also take a step away before making decisions if feeling stressed

Here are 10 lessons we took from COVID-19 that have changed how we manage our money going forward.

Financial health tip #4: Practise psychological distancing

Another habit to adopt as highlighted in research by The Decision Lab, is psychological distancing, which has the potential to reverse the negative impact of stress on financial decisions. Psychological distancing refers to changing your perspective from the immediate circumstances to the longer term or bigger picture (why you are doing something). It is said that just focusing a few seconds on long-term financial goals can help improve financial health and outcomes.

For example, focus on the things you can do when the pandemic is over and save towards these. Use this savings tool to help you calculate how much you need to put away each month to reach your savings goals.

Interestingly, psychological distancing can also apply when we focus on helping others and removing the focus from our own challenges. “People should not have to face these challenging times alone and so we have created a resource centre to help South Africans navigate their finances. Together with our intermediaries, we aim to provide support and help build financial resilience into the future,” concludes Magosha.

The first step to a financially healthy life is to meet with an expert financial planner to help you reach your unique financial goals. Book a meeting today.