How to live sensibly financially in 2021

TO borrow from Britain’s Queen Elizabeth II, 2020 is not a year many of us will look back upon with undiluted pleasure. A year which started promisingly, indeed, turned into an annus horribilis.

The COVID-19 pandemic and its impact on the lives of individuals, businesses, economies and countries is well documented. The global roll-out of the vaccine provided a silver lining to the end of 2020 and offers a promise of hope and improved health in 2021, despite the winds of a second wave blowing across many nations. 

But what about the financial impact on individuals who faced tremendous personal hardships as economies shut down, industries and businesses were forced to close, and millions of jobs shed across the continent? Those who had incomes temporarily reduced during the most challenging months of the lockdown restrictions can count themselves relatively fortunate.

For those who faced financial difficulties, Absa offered a payment relief programme that enabled customers in good standing to access loan repayment relief for an initial three-month period. This helped many of our customers through a period of financial turmoil.

While 2020 was indeed challenging and there is still a tremendous amount of uncertainty caused by the secondary wave of COVID-19 infections, there are tangible steps that consumers can take to start 2021 on a firmer financial footing, to build buffers and inculcate solid principles which will stand them in good stead for years to come.

Learnt lessons

COVID-19 provided harsh lessons in austerity measures, from a macroeconomic perspective right down to basic household budgeting. Forced to endure the pain of cutting back on personal and household finances to survive, the most challenging part of any process of transformation is the initial change.

Now that this is done, it will be vital for customers to stay on top of their finances, avoid reckless spending, and continue to be financially prudent. Going back to old or poor financial habits will likely see a rerun of 2020.

Speaking up

Finances are one of the most challenging issues to discuss in relationships and family circles. But it has been proven that speaking openly and honestly about your financial situation is liberating and an essential step on the road to financial stability and ultimately, security.

Your Absa banker is also available and capable of providing advice on how to best manage your finances, especially during challenging moments. We are available through Chatbanking on WhatsApp, our call centre, or you can visit a branch to speak with one of our consultants, who will be able to point you in the right direction when it comes to the best way to manage money.

Getting back to budget basics

A personal and household budget is endlessly preached by financial advisers and for a good reason. A proper budget allows you to plan accordingly and effectively and in doing so helps you create financial buffers through saving efforts.

If your budget shows that your monthly expenses exceed your income, then you know you have a problem, but at least you have a blueprint on how to start addressing the issue. 

Create a budget that is realistic and works for you. There is no point saying you are going to set aside 20% of your income towards savings when your current financial situation does not allow for this. However, be willing to change your budget as your financial circumstances change and build towards financial security in preparation for emergencies, such as the demise of a household appliance.

Good times

Low-interest rates used to be the trigger for consumers to splurge on purchasing new property or the popular brand-new vehicle, clothing, audio-visual and other tech goodies, and holidays on credit.

Now, with interest rates across most countries in Africa at historically low levels, as governments have tried to counter the economic fall-out from the pandemic, this is the ideal time to pay down debt.

Use the difference between your old and new instalments to pay in extra to reduce the outstanding capital quicker or use additional income to pay off smaller debts first before moving onto the more considerable, longer-term debt. Try to knock off high-interest debt such as store cards and credit cards first.

Paying off debt as soon as you can, so that you can save more, is a smart way of making your money work for you. Absa, as a responsible lender, advises customers to pay off debt as quickly as possible.

Be covered

COVID-19 caught many consumers and businesses entirely off guard, and this is when insurance policies for health benefits, disability, death, retrenchment and temporary income loss can make a world of difference. When times are harsh, personal insurance policies tend to be one of the first casualties of cutbacks but should ideally be kept intact as far as possible.

What the pandemic has taught us is that nothing can ever be taken for granted. Make sure that you have adequate protection plans in place in the event of unforeseen events. You are more than welcome to speak with us about saving, retirement plans, and insurance.

Dreams and desires

2021 is the year to be sober and considered when it comes to expenses. 

Instant gratification is a base human impulse and one that is ever-present. From the latest gadgets and fashion to regular nights out, a failure to plan can wreak havoc with your budget and result in a lack of cash-flow when you need it most.

Use tools such as Absa’s Mobile Banking App to keep track of purchases and expenses to help adhere to a healthy personal financial regime. The app can help you pay bills, check your balance, and invest – all from the comfort of your couch.

In time, the hard yards will pay off in the form of a glowing bank balance and rewarding, stress-free financial lifestyle. And your dreams and desires will be within reach and affordable.

Translate »