How to feel more financially secure during the pandemic

The pandemic hasn’t been a walk in the park. Besides dealing with the anxiety of a public health crisis, many South Africans have also experienced financial stress. Perhaps your salary was reduced, or maybe your work-from-home bills have increased. In either case, money has been tight since the first lockdown.

However, financial woes do not have to define you. There are strides you can take to pull yourself out of the red and improve your finances in the long run. By taking action, your financial confidence will grow, and this change will have a ripple effect on other areas of your life. To help you get started, we’ve laid out some steps you can take to tidy up your finances and help you reach mental stability.

You can’t improve your finances without first finding out what state it’s in. Even if you can feel the tension of having too little disposable income, you may not be certain exactly how you got there each month. By tracking your income and expenses, you will get a better idea of where you stand financially.

This can be as simple as sitting down with a pen and paper and writing down the in- and outward flow of your money. If you prefer doing this digitally, you could also make use of an Excel sheet or Word doc. Make sure you open your banking app and use your bank statements as a guide for your current expenditure.

Some banking apps also include a budgeting panel, which you can monitor and adjust according to your preferred categories. For example, Nedbank recently introduced a MoneyTracker feature which groups your spending and makes it easier for you to keep tabs on it.

Once you have a good idea of where your money is going, you will be able to assess how you can improve this, and then set out a plan for the next month. In essence, this would be the start of you setting out your personal budget. For more tips on how to do this, have a look at our article about how to budget (and stick to it).

Nowadays, you can also make use of budgeting apps, such as 22seven or Splitwise. The former connects to your banking app and automatically categorizes your expenditure, and the latter assists you with group budgeting, such as paying bills with flatmates or family members.

If the reduced your disposable income, you may be struggling to keep up with your debt obligations. This means you may have missed a payment, or you weren’t able to settle a bill on time. As a result, your credit score could have taken a hit. Read more about the impact of COVID-19 on your credit score and find out what you can do to fix it.

Despite being in a financial pinch, there’s always something you can do to help your credit score. Reach out to your lenders and try to renegotiate your payment plans. They will be understanding about your circumstances, since they know how Covid-19 has impacted many South Africans.

If you’re not struggling financially, then this is also a good time to grow your credit score. For example, you can get yourself a credit card and use it to make your monthly payments. If you ensure you settle your account on time each month, your credit score will grow steadily.

In whichever boat you find yourself, you should regularly check your credit score and make sure it’s in good shape. This will prepare you for the day you need to apply for larger credit, such as a personal loan or a home loan, by ensuring you’re approved and that you receive good interest rates.

According to statistics by the South African Human Rights Commission, more than 50% of credit-active South Africans are overindebted. This means that half of those who have borrowed money are unable to meet their monthly repayments.

If you’re struggling to keep up with your lenders, you need to take steps to remedy this. There are two main methods you can use when it comes to paying off your debt.

The first is known as the avalanche method, and it focuses on settling your fastest-growing debt first. Using this method, you will pay the minimum amount towards each of your outstanding accounts, except for your debt with the highest interest rate. Here, you will pay more than you need to in order to settle the account quicker. By doing this, you will reduce your largest fees first and overall, you will pay less.

The second method is known as the snowball method, which aims to reduce the number of open debt accounts you have. Rather than dedicating your excess income towards the largest interest-bearing account, you will use this towards the account with the smallest balance. The logic here is to settle as many open accounts as soon as possible.

Both of these methods are valid, and you should choose the one that motivates you the most to settle your debt. If you feel as though you need help with your debt, then you should consider applying for debt counselling or getting a debt consolidation loan. You can read more about the differences between these two debt solutions and how they will each assist you, depending on your circumstances.

You don’t have to do it alone. Working through your finances can be a daunting task, especially if you’re already struggling with other pressures during the corona pandemic. Speak to your friends and family about your concerns and support each other during these difficult times.

However, if you’re stuck in isolation – for whatever reason – you can always reach out to LifeLine, which is a free, national counselling line and a mental health service. They receive over 200 calls a day, and users chat to them about anything in their lives, from trauma to relationship issues. They will not be able to offer you financial advice, but they will be able to listen to how it has impacted your life and help you achieve your emotional health goals.

Your mental wellbeing is important, and you need to make sure you’re in a good space so that you can achieve the best results – both in life, and with your personal finances. You can start healing from the pandemic, even if you don’t have access to the Covid vaccine yet.

If you’re interested in learning more about how to manage your finances, you can visit our Learn section where we offer a wide range of articles. You can learn how to future-proof your finances, and you can find out what the 7 steps to dig yourself out of debt are.