ASSESS your finances by gathering all your financial documents.
Image: Meta AI
ALTHOUGH inflation in South Africa is at the lowest average rate in 21 years, debt is piling up and job losses are throwing everything off balance. Financial strain can be overwhelming. This can be tough on the entire family. But you are not alone. What you need is a solid plan to help you navigate these challenges, so let’s look at practical steps to manage your finances.
Start by gathering all your financial documents: income statements, expenses, debts and savings. Be honest – you have to know what you are dealing with.
Create a budget
- List your income – what’s coming in?
- Track expenses: essentials such as rent, food, utilities, bond, policies and vehicle re-payments versus non-essentials such as dining out, subscriptions, gifts, clothing and luxury items.
- Prioritise: pay essential expenses first, then debt, then savings.
Tackle debt strategically
- List debt: focus on high-interest ones first.
- Contact creditors: negotiate payment plans or lower interest rates if possible.
- Consolidate if it helps lower the payments.
- Pay bills on time. You need to maintain your credit record.
Don’t take on any new credit.
Job loss?
- Apply for unemployment insurance benefits (UIF) immediately.
- Update your CV and send it out. Use platforms like LinkedIn, and start networking.
Build an emergency fund
Aim for three to six months’ worth of expenses. Start small if that’s all you can afford. Every bit counts.
Spend smartly
- Start meal planning and cooking at home instead of buying take-aways or eating out.
- Cancel unused subscriptions or streaming services you don’t use.
- Shop smart: buy in bulk or when items are on sale or discounted.
Insurance and policies
- Life insurance: do you have adequate cover for your family’s needs? Is there more cover than you actually need right now? Policies increase annually with premiums, so the cover you may have initially taken will have grown over time. Look at reducing benefits to get a lower premium rather than cancelling the policy completely. Remember, if your health has changed and you cancel the policy, you may be uninsurable in the future.
- Medical aid: do you need a comprehensive medical aid that covers in and out-of-hospital expenses or do you only require a hospital plan to cover you for the larger in-hospital benefits? Hospital plans tend to be cheaper, so it will be an excellent way of reducing expenses without sacrificing private medical care. And both options will cover your chronic medication. Most companies will allow you to change your plan to a lower option.
- Investments and retirement annuities: can you afford this now? You can either reduce the premium until you are able to afford it again and then take it back up; or you can request a premium holiday on these types of policies from your insurance company. Most companies will allow a premium holiday of 6 to 12 months where your premiums are put on hold for that period and then resume once the premium holiday ends. This protects you from losing the policy that you have paid towards for so long. Please note this will affect your original maturity values.
- Your short-term policy: this is your vehicle and home insurance. Have you checked that everything that is insured still needs to be there? You may need to reduce the value of your household contents; or maybe you have a laptop, cellphone or jewellery insured on the policy that you no longer have? Has the insured value (retail/market value) of your vehicle decreased annually to reflect depreciation?
You don’t have to do this alone. Debtors are always willing to assist, but only if you communicate with them. By taking control and making a plan, you can reduce financial stress and build a stronger future for you and your family. For personalised guidance on managing your finances during trying times, speak to your financial planner before making any significant decisions.
Ashika Devnarain is a financial planner and director at The Insurance Network, which can be contacted via WhatsApp at 083 385 0606 or email: [email protected]