2020 has been a year of challenges, but it’s also been a year of transformation. And when it comes to finances, there may have been some financial knocks, but there has also been some underlying financial relief.
An example of this relief is the drop in the repo rate. What does this actually mean though? Lower interest rates – and that results in savings from unexpected areas such as lower car and bond instalments, which helps to re-establish some financial stability.
Here are a few financial changes and strategies to help you adjust your budget to the new, eased lockdown regulations.
Reallocate your money
With many of our usual activities coming to a standstill as a result of lockdown restrictions, there are some areas where most of us have cut costs. When you have time on your hands, go through your bank statements and make a list of all the areas where you’ve saved money. These may include:
- Fuel and transport
- Luxury items
Once you’ve identified where you’ve saved, allocate this money accordingly. You could add some of it to your savings account and put another portion towards your debt. That way, you can pay off your debt even faster.
Take advantage of the interest rate cut
As the prime lending rate has been reduced to 7.75% as of April 2020, your monthly instalments on credit have decreased. Speak to a finance expert about recalculating your home loan, vehicle and credit card repayments to work out what your new, decreased instalments are. Once you know the amount you’re saving on each repayment, you can:
- Continue to pay the same instalments to lower your debt
- Use the extra money to cover expenses
- Pay off credit with higher interest rates, such as store or credit cards
Talk to your family
With everyone being housebound for the most part, you can call a family budget meeting. You might want to do this with your kids separately if you have young children. Chat with them about why budgeting is important, where money comes from and how everyone should work together to save. You should consider reducing their allowances in line with their new needs during the lockdown. Talk to your partner, housemate or flatmate about how you can work together to reduce costs and carve out some time to reassess your budget as a team.
Continue to avoid overspending
Now that more retailers have reopened and online stores are able to sell more products, it may be tempting to start splurging again, but resist the temptation! Instead, create a budget that includes all your expenses, savings and debt repayments and see how much disposable income you’ll have left. Allocate an amount from this to one splurge item per month. That way, you’ll have something to look forward to that you really want and which has been budgeted for.
Manage your investment contributions
If you have more than one investment and savings fund, consider putting some of the contributions on hold, especially if you are running low on cash. This includes your employee retirement fund. Contact your company’s finance department to either lower your contribution or pause it, if possible. The same would apply if you are contributing towards a unit trust; you may be able to put your contributions on hold temporarily. If you have a personal investment, you can issue a debit stop order. Once you are more settled financially and your salary is more stable, you can readjust your contributions.
The information in this article is for information purposes only and does not constitute professional advice.