How to recession-proof your life

How to recession-proof your life

Last updated on 22nd June, 2021 at 09:53 am

It feels as though our economy is on a permanent roller coaster ride.

“Given the rising cost of living in South Africa, bank balances that run dry every month could start becoming a regular occurrence, leaving no shelter from unplanned expenses, never mind big financial emergencies,” says André Wentzel, solutions manager for Recurring Savings at Sanlam.

To prepare for the worst, you need to strive to be your financial best; here are some practical ways to recession-proof your life.

When it comes to your job

In this economic climate, nothing is guaranteed – including your job. With an unstable economy, businesses are under pressure more than ever before, and retrenchments are an unfortunate reality.

Speak to your financial planner about retrenchment insurance and the benefits of this sort of protection – you may need to output a little more each month for this cover, but in the long run it could be your saving grace.

Look at how you can stay relevant and ahead of the game when it comes to your particular position at your company. Are there short courses you can take to improve your current skills? Speak to your HR department about the company’s training policy and keep ahead of the trends and advancements in your industry.

When it comes to your debt

“If you’re going to repay debt, try to increase the repayment amount,” says Wentzel. “If you are struggling to put money away, the best time to start is when you get an increase. In addition, use debt effectively: stick to good debt (the bond on your home or your study loan) and use cash for other expenses instead of store cards. You pay high interest on short-term debt, so make it a priority to reduce it.”

If you’re struggling to pay off your debt, speak to your creditors to try and find a solution and payment plan that will ensure you don’t get blacklisted. Don’t just avoid the problem and hope that it will go away – it won’t, so you need to take action.

When it comes to your living expenses

Jyoti Gopee-Mothie, a financial planner at Pinnacle BlueStar, says it’s imperative to regularly conduct an Essential Living Expenses Review, to see where you are able to cut back – small changes make a bigger difference than you think.

“Look at your utilities and consider switching off your geyser during the day when it’s not in use. Fix dripping or leaking taps at home to reduce water wastage and your bill. Keep your slips after doing grocery shopping and analyse what you are spending your money on – cut back on the luxuries like biscuits and expensive coffee and stick to the basics.”

Similarly, a certified financial planner at Plan-B BlueStar Jaco van Schalkwyk suggests: “Cut or downgrade luxury services; can you get a cheaper DSTV package, data contract or mobile phone package? When you qualify for a cell phone contract upgrade, take a moment and think whether you need or want a new phone. If your current phone is in good condition, why not continue using it and then reduce your monthly subscription?

“Cutting down on takeaways, preparing your own packed lunch for work, skimping on the morning cappuccinos en-route to work – all of these little things add up.”

Wants vs Needs

Van Schalkwyk suggests separating ‘wants’ from ‘needs’.

“Do you really ‘need’ that 42-inch flat screen television or is it a ‘want’? When money is tight it should not be spent unless absolutely necessary. Belt-tightening can be temporary if you follow a simple strategy: ratio 4:1. Save R4 for every R1 you intend spending on ‘wants’.”

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