While it’s always important to have a good handle on your finances, the past year has changed the way we think about saving, spending and investing in our futures. For many of us, the COVID-19 pandemic has meant we have less money than before and with lower salaries and rainy-day reserves depleted, what do we do to feel safe, both now and in the future?
Fifi Mompati, Head of Brokers and Alternative Distribution at Liberty, believes the best strategy is to embrace new thinking around financial planning.
Analyse: Find the best way to save, invest and insure your money
Everyone’s finances are different, so working out what to do with your earnings – lower than usual or not – means considering many life factors. Your age, your health, the size of your family, dependants and monthly expenses all need to be determined so you can figure out the best way to save, invest and insure yourself. But you don’t have to do it alone. Every day, Financial Advisers give out expert advice because it's their job to create the best plan for you.
“For example, many questions have emerged around the difference between life insurance and funeral plans, and what is right for a particular individual, and how much they should spend,” says Mompati.
Funeral policies focus on the needs and costs of a funeral, meaning that the burial, the costs of transport and other related expenses are covered, usually in a lump sum payment.
But life insurance goes beyond that, giving you and possibly your entire family financial protection if the main breadwinner were to pass away. By insuring yourself for a certain amount, this money can pay for various expenses previously not budgeted for. Determining which is right for you means understanding your financial situation and how much you can afford to spend.
Save: Establish short and long-term goals, and stick to them
In the short term, putting together a budget can be a revealing way to examine your spending habits, and it will help you identify where you can save. "It’s shocking how much money slips through the cracks every month, sometimes on expenses you barely remember,” says Mompati.
Digital tools and apps can help you keep track of your spending so you can keep an eye on every precious cent of your salary. In the medium term, you can start building an emergency fund, even if it’s just a few hundred rands, you can continue to grow this, and it will be a safety net available in case of unexpected expenses.
“A savings cushion can make all the difference, and emergency funds like this have helped a lot of people get through tough times like the pandemic,” says Mompati.
In the long-term, your retirement and health needs should be a key focus. Calculating how much money you need to retire can be intimidating, but there are online tools, retirement experts and of course, Financial Advisers, who can guide you in this process.
Protect: Prioritise you and your family’s future health and financial freedom
No one likes to think about possible accidents and illnesses we might have to face in the future. But as we learned during the pandemic, sometimes situations come up that you might think always happen to other people and never yourself. Health insurance, life cover and funeral cover can all assist in relieving the strain of a bad situation, so finding the right cover means coming to terms with limiting your spending for the best possible peace of mind.
“Instead of focusing on what-if scenarios, it’s better to focus on what you can control. When you have a plan, you don’t have to worry as much,” says Mompati. Life insurance can offer a wide variety of options - from covering the costs of your children’s education to ensuring your own debt is covered.
Funeral cover provides short-term relief for the expense of a funeral, safeguarding the availability of money for this important event and alleviating potential stress while allowing for the family to grieve without added financial worries.
“It’s during challenging times that we must gather the strength to be honest about our financial situations, and plan accordingly,” says Mompati. For many people, some of the first expenses that face the chopping block are the monthly amounts we devote to insurance cover – and our future selves.
“Life insurance, funeral cover and retirement planning are vital to a successful financial outcome in our lives, and there are easier ways to manage our spending habits,” says Mompati.
PERSONAL FINANCE