Crises are difficult to handle because they’re unpredictable, but controlling the things you can will put you in a better position to deal with uncertainty.
One of the things you can and should control to the best of your ability is your finances. If you’re stuck at home with only re-runs of 1990s sitcoms for company, there’s no better time to get started.
Financial services provider, DirectAxis, suggests four ways you can constructively use the spare time whilst in lockdown to better manage your money.
• Improve your credit score. Your credit score is the way the financial world sees you. It’s not about how much money you have in the bank or how much you earn, but how financially responsible you are. Very few South Africans have perfect credit scores, which means nearly all of us have room for improvement. A twenty-point improvement should be achievable for most people.
The benefit of improving your score is that you can get credit if you need it and it could save you money. People with higher credit scores are regarded as less of a risk and can be considered for better rates on loans, insurance premiums and rentals.
• Review your budget. Some of the assumptions you made at the beginning of the year may no longer be true. For example, you might not be able to count on the salary increase you were expecting. Working from home could mean you’re saving on transport costs, but that your water, data and electricity bills are higher. You may also have to account for that Netflix subscription you’ve just taken out. Getting a clear picture of how you’re spending money puts you in control. It also allows you to determine where you might be able to make some savings and perhaps put a little money aside in an emergency fund.
• Pay your debts on time. Although the economic impact of the Covid-19 crisis isn’t yet known, it will be substantial. Banks have been working with the South African Banking Association to find ways of helping customers meet their obligations, so check your financial services provider’s website and social media pages for updates.
But remember, skipping monthly payments now in the hope that there will be some sort of future leniency is a very bad idea. It will negatively affect your credit score and will put you in breach of your contract with the lender.
• Improve your financial literacy. The better informed you are the more likely it is that you’ll make good financial decisions. Although the world is facing an unprecedented crisis, the fundamentals underpinning sound money management haven’t changed.
