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The lockdown and your finances

Very few people could have imagined anything like the coronavirus and the subsequent lockdown. A world that literally came to a standstill. The story line sounds like a blockbuster on the silver screen. At first it almost sounds like a well-earned December holiday that starts at the end of March. You expect the movie to come to an end at any time or that you would wake up and realise thankfully that it was only a nasty dream. Then you come to realise – this is reality, a harsh reality, an intractable period, a cold fear gripping your heart. Covid-19 has totally changed our world as we knew it. The financial impact the lockdown is having on the economy, businesses and households is astronomical. Apart from that, the South African economy and numerous households already were under intense pressure even before the advent of Covid-19. Everybody is experiencing enormous financial pressure. It is time to seriously reflect upon our finances and to make sure that the basic principles are followed as far as possible and that we have all the necessary and reliable information to make the best possible decisions during this time.

The lockdown and your finances

Very few people could have imagined anything like the coronavirus and the subsequent lockdown. A world that literally came to a standstill. The story line sounds like a blockbuster on the silver screen. At first it almost sounds like a well-earned December holiday that starts at the end of March. You expect the movie to come to an end at any time or that you would wake up and realise thankfully that it was only a nasty dream. Then you come to realise – this is reality, a harsh reality, an intractable period, a cold fear gripping your heart. Covid-19 has totally changed our world as we knew it. The financial impact the lockdown is having on the economy, businesses and households is astronomical. Apart from that, the South African economy and numerous households already were under intense pressure even before the advent of Covid-19. Everybody is experiencing enormous financial pressure. It is time to seriously reflect upon our finances and to make sure that the basic principles are followed as far as possible and that we have all the necessary and reliable information to make the best possible decisions during this time.

Overview and aspects of personal finances

Some basic concepts and principles to review

ASSETS

Volgens Wikipedia is ’n bate ’n ekonomiese hulpbron. Die entiteit of persoon het beheer oor ’n bate en dit kan gebruik word om ekonomiese voordele te bekom. Die eenvoudige manier om bates te beskryf, is om te dink aan enigiets wat besit word. Bates sluit die volgende in: bankrekeninge met positiewe of kredietsaldo’s, beleggings, die huidige waarde van ’n uittreeannuïteit, eiendom, meubels, voertuie, toerusting, skilderye, ’n wynversameling, debiteure (waar mense jou geld skuld, bv. ’n lening aan ’n familielid) ens. Bates het ’n positiewe impak op jou persoonlike finansiële welstand en op dié van ’n besigheid. Die doel is altyd om bates te laat groei, veral bates wat inkomste genereer, byvoorbeeld beleggingseiendomme wat in waarde groei en huurinkomste voortbring, beleggings wat rente of dividende as opbrengs lewer of besighede wat winste lewer.

Bates kan verdeel word in likiede bates en nielikiede bates. Likiditeit beteken hoe vinnig ’n bate in kontant omskep kan word. Bankrekeninge en beleggings wat reeds in kontantvorm is, is dus die mees likiede bates. ’n Kennisdeposito of vaste deposito waar daar ’n kennisgewingtydperk of ’n sekere termyn by betrokke is, is minder likied as kontant in ’n bankrekening. Eiendom is ’n nielikiede bate omdat dit maande en soms meer as ’n jaar kan neem om dit te verkoop en sodoende in kontant om te skakel.

LIABILITIES

According to Wikipedia, a liability is an economic obligation. A liability is viewed as something resulting from a previous event that creates a present obligation that will result in an outflow of economic resources of the entity or person. A simple way to describe liabilities is to think of anything that is owed to another person or party (bank, finance house, credit provider, shop, relative, etc). Liabilities include the following: mortgage bonds, vehicle financing, personal loans, overdraft facilities, credit cards with a negative or debit balance, store accounts, loans from relatives, student loans, etc. Liabilities have a negative impact on your personal financial wellbeing or that of a business. The objective generally is to avoid liabilities or to repay them as soon as possible because of the interest payable on liabilities.

Liabilities may also be divided into current liabilities (short term) and non-current liabilities (long term). Liabilities repayable within a year are classified as current liabilities or short-term liabilities. Short-term liabilities typically are overdraft facilities, credit cards, store accounts and personal loans. Liabilities repayable over a longer period of more than a year are classified as non-current liabilities or long-term liabilities. Long-term liabilities include vehicle financing and mortgage bonds. Short-term liabilities typically have a higher interest rate and are regarded as more expensive debt. Long-term liabilities, on the other hand, have lower interest rates and are viewed as less expensive debt.

NET ASSET VALUE

Net asset value may be compared to the basic accounting principle of ownership interest indicated on a balance sheet. Ownership interest is calculated as follows:

• Assets less Liabilities = Equity / Ownership interest / Net Asset Value

According to Wikipedia, it may be viewed as the net asset value of the entity that accrues to the shareholders when all the liabilities are redeemed.

If the company’s or business’s assets exceed its liabilities, the company has positive ownership interest or equity. Positive ownership interest is a sound principle and indicates that the company is solvent and prosperous. If the company’s or business’s liabilities exceed its assets, the company has negative ownership interest or equity. This is an unsound position and a sign that the company is not prosperous, has too much debt and may be declared insolvent or may have to close down.

The same concept and principles are applicable to personal finances.

• Personal assets less Personal liabilities = Net Asset Value

If your personal assets exceed your liabilities, you have a positive net asset value. Positive net asset value is a sound principle and indicates that you are solvent and prosperous. If your personal liabilities exceed your assets, you have a negative net asset value. This is an unsound position and a sign that you have too much debt and urgently have to reconsider your financial position.

Example


 

Example 1 – Positive asset value
Amount

Example 2 – Negative asset value
Amount

Assets

 

 

Property

R1 000 000

R1 000 000

Investments

R200 000

R0

Bank balance

R20 000

R20 000

Furniture and jewellery

R80 000

R80 000

Liabilities

 

 

Mortgage bond

(R700 000)

(R950 000)

Credit card debt

(R0)

(R100 000)

Personal loan

(R0)

(R200 000)

Assets less Liabilities =
Net Asset Value

R600 000
Positive

(R150 000)
Negative

PERSONAL BUDGET

A budget is a very valuable resource for businesses and individuals. A budget is important to monitor and manage income and expenditure and also to identify overspending.
A budget may be compared to an income statement.

• Income less Expenditure = Surplus / Deficit

When income exceeds expenditure, there is a surplus (also referred to as a profit in the case of businesses). This is favourable position, and we should aim to grow the surplus. When expenditure exceeds income, there is a deficit (also referred to as a loss for businesses). A deficit is an unfavourable position that should be avoided. A deficit is an indication of overspending or that income does not cover the essential expenditure.

Prepare a budget on a monthly basis for a year in advance. Income and expenditure will not be the same every month. Take into account annual increases, inflation, interest rate changes and one-off expenditure (such as licence renewals or Christmas gifts).

Example

 

Classification

Month 1
Amount

Month 2
Amount

Income

 

 

 

Salary / Business income

Income

R20 000

R20 000

Investment income

Income

R500

R500

Expenditure

 

 

 

Saving for holiday

Saving

(R2 000)

(R2 000)

Mortgage bond instalment

Essential needs

(R14 000)

(R14 000)

Water and electricity

Want

(R2 000)

(R2 000)

Entertaining

Want

(R2 000)

(R0)

Unforeseen expenditure

Unforeseen expenditure

(R1 000)

(R1 000)

Income less Expenditure =
SSurplus / Deficit

 

(R500)
Deficit

R1 500
Surplus

Essential needs as against wants

A budget also is useful to identify and manage essential needs and wants. Essential needs refer to expenditure without which we cannot live. Essential needs would include accommodation, food, water and electricity, school fees, transport, medical expenditure etc. Wants refer to expenses that are regarded as luxuries that we do not need to survive. Wants include items such as going to the movies, dining out, toys, new appliances, beauty treatments, holidays etc.

Essential needs cannot be removed completely from a budget. What we can do is to try to save on essential expenditure. Examples of possible savings on essential needs:

  • Buy food in bulk and look out for special offers.
  • Consider a lift club for people working at the same place or nearby places or even to drive the children to school or activities, saving on fuel costs.
  • Save on the consumption of water and electricity.

Wants can be reduced or even cut out completely where possible. Be creative and try to replace wants with other cheaper or free options. Examples of savings on wants:

  • Organise a movie evening at home with popcorn.
  • Camp out in your garden.
  • Ask relatives or friends to bring their favourite dishes to save on entertainment costs.
  • Avoid ordering take-away meals and prepare food at home as a family.

It is important also to teach children the principles of essential needs and wants. If there is no money now for something classified as a want, one has to save until the want can be afforded. Furthermore, it is important not to incur debt to pay for wants.

Lifestyle costs and Inflation

Because of inflation, lifestyle costs increase all the time. Inflation is calculated on standard items and often the price increases for more expensive and luxury items are not taken into account. When you calculate your personal rate of inflation by calculating the increase in your personal expenditure on an annual basis, you will usually find that your personal rate of inflation is considerably higher than the national rate of inflation, particularly when the increase in expenditure such as medical costs, fuel, insurance, clothing and food is taken into account. The other harsh reality is that salary increases generally do not keep up with the actual increase in personal expenditure. This means that the gap between income and expenditure becomes relatively smaller, resulting in a situation where debt has to be incurred to cover cost of living. This is a very negative situation because the whirlpool of debt just gets bigger and bigger and income is not enough to cover the cost of living and repayment of debt. If you find yourself in this position, do not wait any longer – get help and find a solution to improve the situation. Of course, this is easier said than done. But we know that where there is a will there always is a way. Make a decision and do something.

Basically, there are two options to deal with this situation. Firstly, reduce expenditure as far as possible. Secondly, find a way to get additional income.

Savings plan

A savings plan refers to a plan to save actively in order to achieve a specific goal. There is a difference between saving and investment. Saving means to save money for a specific purpose, such as to go on holiday or to buy a new TV. Saving usually has a shorter term, generally less than a year. There may well be savings objectives with a longer term, such as saving for a deposit on a new car or house or for a child's studies in the future. Because saving is of a short-term nature and is aimed at a specific objective, more liquid savings options (can be converted into cash quickly but preferably is in cash already) and lower-risk options usually are recommended. Good options for savings objectives include notice deposits, fixed deposits and money market funds.

With investments the objective is to create wealth in the longer term. This means that money is put away to buy assets that will grow and yield a return in the longer term. Unit trusts, shares and property are typical examples of investments or assets that can grow and yield a return in the form of interest, dividends and rental income. With investments the ideal is to have liquid as well as non-liquid assets in the portfolio, and also assets with a low, medium and high risk profile to reduce risk but also to ensure maximum return.

Then there also are savings plans aimed specifically at retirement. Options include pension funds, provident funds and preservation funds as well as retirement annuities, although many people also view properties, businesses and offshore investments as part of their retirement savings plan.

The ideal is to make saving part of your budget. Put a certain percentage of your income away every month. It is important to transfer savings funds from your daily bank account to a savings or investment account. If you leave it in your bank account, you will be tempted to use it for something else that you may not really need, and you also earn minimum interest on your daily bank account. Sign a debit order to transfer your savings funds to your savings plan and investment funds. If this happens automatically, you will quickly get into the habit of saving. Also get into the habit of transferring any surplus funds in your daily bank account at the end of the month to your savings account.

Emergency fund

An emergency fund is funds that are available for emergencies. Going on holiday or buying a new TV are not emergencies. Huge medical costs not covered by your medical aid fund, car problems that are not covered by a motor plan, a computer needed for work or studies that is stolen – these are examples of possible emergencies. Having an emergency fund, in a country and at a time where retrenchments are the order of the day, definitely is of great value. The Covid-19 situation, with people having to survive on less or no income, surely qualifies as an emergency, and people who do have an emergency fund probably are people with the least financial stress during this time.

The golden rule is for an emergency fund to contain enough cash to cover the cost of living (essential expenditure as well as debt repayments) for three to six months. Because these funds should be available immediately or very quickly in an emergency, it is recommended that you keep an emergency fund in liquid options where no notice or fixed investment term is required. These funds should preferably also be kept in low-risk savings plans. If you have to use funds from your emergency fund in an emergency, be sure to put funds back again into the fund as soon as possible for future use.

How do I deal with a financial crisis?

In view of the financial crisis most households find themselves in at present and probably over the next couple of months, it is important to look at practical suggestions to help survive this crisis.

It certainly is a time when a mixture of emotions are experienced. There are good days, days that are not so good and days that are very bad. Do not make emotional decisions during a crisis. Wait for a day or two and try to think clearly about the situation.

Do not do something because everybody appears to be doing it. If payment holidays on debt are the order of the day and most of your friends are doing it, it does not mean that it is a good option for you. Every situation is unique, and needs differ from person to person and from household to household. Make well-informed decisions in accordance with your unique situation and needs. Get as much information as possible, make sure the information is from reliable sources and then make a decision according to what is the best solution for you. In many instances it also is useful to make calculations of the various options available and then decide accordingly.

Carefully monitor your bank statements during this time to identify and report any errors at an early stage. Many changes are taking place now, and this is when errors can slip in easily. Make sure your debit orders are functioning correctly. Where it was agreed on a reduced amount or no amount payable during this time, make sure that this is indeed happening. Where you have determined scheduled payments and you now have to pay less or not at all, adjust your payment accordingly.

Understand your income and expenditure.

Go through your bank statements for the past couple of months as well as any cash receipts or payments to determine your actual income and expenditure. Classify all the transactions in the following categories: Go through your bank statements for the past couple of months as well as any cash receipts or payments to determine your actual income and expenditure. Classify all the transactions in the following categories:

  • Income
  • Saving / Investment
  • Essential needs
  • Wants
  • Unforeseen expenditure

If you already have a good budget, revise your budget and make changes according to your current situation.

• If you do not have a budget, it is very important during this time to prepare a budget. A budget that is kept in your head only does not work. Write it down, use a spreadsheet or a software program or app.

What does an effective budget look like?

Use the actual income and expenditure according to your bank statements for the past couple of months as basis for drawing up your budget. Also make provision for possible changes owing to the lockdown. Remember, an effective budget includes income and expenditure. Merely checking your expenditure against it is not good enough. You also have to ascertain whether your income exceeds your expenditure and whether you may be overspending. Include the various categories in your budget: income, saving / investments, essential needs, wants and unforeseen expenditure.

Reduce expenditure as far as possible and adapt your lifestyle.

Try to bring about savings on your essential needs and completely cut out wants or postpone them to a later stage. Examples where expenditure may be reduced:

  • Ensure that no debit orders are still deducted for services that are not being used any more.
  • Cancel TV, magazines and other non-essential subscriptions.
  • Prepare food at home and avoid take-away meals and convenience meals.
  • Cut out take-away coffee, chocolate and other delicacies.
  • Ask your bank for a cheaper bank charges package that still meets your needs.
  • Get and compare a few quotations for insurance. Make sure you compare apples with apples and still get the same coverage.
  • Be creative with activities to save money, for example picnics, cycling as a family, entertaining at home.
  • Look out for cheaper cell phone, data and internet packages.
  • Draw up a shopping list and stick to it, do not buy unnecessary items.
  • Plan shopping better to avoid going to the shops often, saving on fuel and parking costs.

Where you are unable to carry on paying for something or if it is not an essential item, make arrangements with the provider at an early stage and cancel debit orders where necessary. Make sure you understand the cancellation conditions and whether there are fines or notice periods applicable.

If it is indeed an essential expenditure or repayment of debt, contact the bank, insurer or supplier and make arrangements for payment. However, it is important to understand the terms and conditions as well as the impact in the longer term, so you can make an informed decision.

While saving is essential for your financial wellbeing, it is not essential for surviving the crisis. For this reason you may consider temporarily suspending your savings plan and using the contributions towards essential expenditure during this time. Where you are making regular monthly contributions, it is advisable to enquire about the implications of suspending payments.

Calculate your net asset value and determine at an early stage whether your liabilities exceed your assets.

Start taking corrective action at an early stage rather than waiting until it is too late. If you urgently need cash, it always is better to convert existing assets into cash rather than to incur debt. If you have additional investment properties, you may consider selling them or withdrawing your investments. With the markets being under pressure at the moment, chances are that you will incur losses. Also remember to bring the tax impact into account when you sell assets or withdraw investments.

The interest rate reductions of one percentage point each in March 2020 and April 2020 have brought welcome relief for all who have debt in any form, except if they have a fixed interest rate option. During a crisis, these interest savings can be used effectively to pay for essential expenditure. If you are still able to cover your lifestyle costs, you are advised to carry on paying the higher instalment so you can reduce your outstanding capital amount and pay off your debt quicker. Another good option is to use the interest savings to create an emergency fund or to top up your existing fund if you have used it during this time.

If you have more than one form of debt, it is advisable first to pay off the debt with the highest interest rate. Short-term debt options such as credit cards, overdraft facilities and personal loans usually have higher interest rates, so this debt should be redeemed as soon as possible. When your outstanding balance on short-term debt options is low, however, it may be a better option to rather use any additional funds to pay off the long-term debt options such as vehicle financing or a mortgage bond with large outstanding balances.

Avoid making late payments on debt, paying a smaller amount or not paying at all. Late payments, smaller instalments or missed instalments not only have an interest impact and may involve a fine, but will also negatively affect your credit record. A negative credit record will mean that in future you will not be able to qualify for debt again or you will have to pay much higher interest rates. Make arrangements at an early stage if you are unable to pay the full instalments.

Renegotiate the existing interest rates on your debt.

If you have a good payment record, banks and finance houses may be more amenable to downward adjustments of interest rates during this time. Even a 0,25% decrease in your existing interest rate will make a huge difference in the longer run.

If you have various debt options, you may consider consolidating your debt into an option offering the lowest interest rate. You may consider transferring other debt options to one of your existing debt options offering a lower rate. You could also consult your bank on an alternative option with a lower interest rate in which to consolidate your other debt options.

Credit cards and store accounts are some of the worst evils as far as debt is concerned. Not only is it expensive debt, but it is easy to simply take a card and pay for something that quite possibly is not an essential item. Destroy your cards and get into the habit of saving for an item until you can buy it for cash.

Contact your vehicle financiers and renegotiate your repayment terms. Make sure you understand the full impact in the longer run.

Contact the bank or other financial institution where your mortgage bond is registered and find out about any payment holidays or discount applicable during the lockdown. Payment holidays are a special concession where you do not have to pay instalments for a period, usually three or four months. Bear in mind that interest and fees will still be charged and capitalised during payment holidays. The result is that you will have a higher outstanding capital amount following the payment holiday and your instalments and interest component will be higher in future.

In extreme circumstances where there is no other option, consider debt counselling. Review your insurance products and retirement planning on a regular basis. Contact your adviser to discuss options for temporary relief regarding payment or premiums or contributions. Make sure you understand the full impact and the terms and conditions.

Start an emergency fund if you do not already have one:

If you have to withdraw funds from your emergency fund during this time, top up the fund as soon as possible after the lockdown. Ways to build your emergency fund.

Every month, budget for unforeseen expenditure. In the months when there is no unforeseen expenditure, transfer the saving to your emergency fund. Transfer savings resulting from the lower interest rates to your emergency fund.

Stay away from high-risk investments during times of crisis, unless you have savings that you are not going to need and you are comfortable with to lose. Understand the full terms and risk involved in an investment before deciding on it. During times of crisis there certainly also are many opportunities for investors with additional funds to make good money. However, do not expose your hard-earned money to unnecessary risks during uncertain times because you are desperate to make money. There is no “get rich in an instant” investment and many people are done in by tricksters during tough times.

There are many good financial principles that may help bring relief during times of crisis, but the best advice certainly is to try to create an additional source of income. Sometimes this is easier said than done, and circumstances as well as a lack of time, money, ideas, experience and knowledge may be valid reasons that prevent you from doing this. Where there is a will there is a way, and anyone who really wants to will be able to do something, even if you begin on a very small scale. It will grow and you will never regret having made the decision. Even leaving the present pandemic out of the picture, South Africa is a country with an unstable economy and a high rate of unemployment. Whether we want to believe or hear it or not, anyone may lose his or her job at any time. We cannot run the risk of having to rely on only one source of income.

Examples to consider where little or no initial capital outlay is required:

  • Get a part-time job over weekends or in the evenings.
  • Rent out a spare room.
  • Start a business in your spare time, or a second business if you already have a business.
  • Network marketing is a good source of income for many people.
  • Refer people from your network to other businesses and charge a reference fee.
  • Use your hobby to earn money – take pictures for friends, bake cakes for colleagues, prepare home-cooked meals for working people, sell your handicraft.
  • Look after other people's houses or pets or do shopping for other people.
  • If you like writing, start a web journal. Teach people a new skill or share your knowledge with others on YouTube or by means of an online course.
  • Sell products online.

Large-scale retrenchments are predicted by experts, and while nobody wants to be a prophet of doom, it is better to be prepared if this should happen to you. Therefore, keep your CV updated so you can send it out as soon as possible in such an event. Be proactive, do research and look out for other possible opportunities you may consider in the future.

The most important advice remains:

Maintain your assets, your health and your faith Protect your assets, pay attention to your financial wellbeing and expand your financial knowledge. Live a healthy lifestyle – eat healthy, exercise regularly, take vitamins to boost your immune system and get enough sleep. Financial stress and uncertainty have a serious negative effect on your health. Most important of all, keep your faith. Put your trust in God to carry you through these tough times, because only He can.

1.1. WHY ARE MY JOB AND INCOME SO IMPORTANT?

Having a job and an income meets our daily primary needs. To a large extent this is the pivot around which our lives revolve, considering what part of our lives we spend on work. Being able to work and earn an income, however, has a bigger and enriching impact on our daily existence, secondary needs and wellbeing.

  • Professional identity – for many people their occupation to a large extent defines their existence as human beings. It is something for which you have worked hard and for many years and for which you probably have studied.
  • Confidence – it gives a sense of dignity.
  • Routine – as with children, routine in many cases is essential for success.
  • Sense of purpose – your career and work make you feel you are going somewhere and pursuing an objective.
  • Social network – all of us have a need for interaction and to socialise, also in a work environment.
  • Marketability – your experience, knowledge and skills open other doors.
  • Financial security – work is for most people their primary source of income, and income is essential for survival. A job and income make people feel financially safe.

Reference/Example

1.2. CASE STUDY: GUIDELINES AND ADVICE FOR SPECIFIC QUESTIONS

Specific scenarios may be offered through advice and guidelines for elucidation. As a guideline, the following questions may be answered by way of example:

A harsh reality for many! Consider all the options of possible pay-outs in such a case – retrenchment package, unpaid leave, unemployment insurance, pension fund or provident fund. The first step is to carefully work through all your expenditure and make a list of it. If you have a comprehensive budget, you may use this to investigate your expenditure. Identify the items of expenditure that are absolutely essential for survival – accommodation, food etc.

Can you achieve any further savings on the absolutely essential expenditure?

Cut out the other items of expenditure that are not absolutely essential. Where you have a contractual obligation to pay monthly instalments, premiums, contributions or fees, for example medical aid fund, insurance, retirement annuities, contact the organisations concerned and enquire about the options they may offer for temporary relief, payment holidays, reduced amounts etc. Ask how this will affect your coverage during this period and in the long run. The same goes for all debt you may have – mortgage bond, vehicle financing, overdraft facilities, personal loans, credit cards etc. Do not simply stop making this type of payment without making arrangements with the organisation concerned, to protect yourself. Forward your CV to as many recruiting agencies, companies, networks and also social media groups as possible. With the increasing impact of the lockdown on the economy and businesses it is probably going to be more difficult to get another job soon.

What else can you do to earn an income? Can you use a hobby to earn money?

What needs do you see where you could help other people? Do you have skills you can teach other people or start your own business with? This undoubtedly is a time to think out of the box and try anything to survive the crisis.

My salary has been cut considerably, what are good guidelines for balancing my finances?

Go through your expenditure critically – see where you may achieve savings on the essential expenditure and cut out the non-essential expenditure. Make arrangements with your bank, credit provider, insurer, medical aid fund etc for temporary relief. Ask your employer whether there are options for restructuring your remuneration package – if you put money away every month as part of a saving scheme or 13th cheque (bonus), this may be paid out; possibility of lower premium on group coverage; reducing your pension or provident fund contributions.

I simply have too much debt, what can I do to address this situation?

Change your mindset by saying if I cannot buy something for cash, I am going to save until I can afford it. Do not incur debt to buy unnecessary items or luxuries. Draw up a feasible budget and stick to it. Do not spend more than you earn. Try to pay more than the minimum instalment owed on your debt. By doing this, you will have an increased allocation to your capital, resulting in lowering your outstanding balance and interest component, and you will be able to repay your debt quicker. With the interest rate reduction of two percentage points announced in March and April you will observe a saving on instalments for all debt where you have a variable interest rate option. If possible, continue paying the higher instalment. If any money is left over at the end of the month, use it to repay your debt. If you receive any additional cash, use it to repay your debt. Make a decision to decrease certain monthly expenditure and to use this amount in your budget to repay your debt. Consider consolidating your debt into an option offering the lowest interest rate, replacing debt with higher interest rates with debt with lower interest rates. As a last option, consider debt counselling.

I need cash immediately, how can I get it without exacerbating my financial position in the long run?

Limit your expenditure to the absolute minimum and contact your bank, insurer, medical aid fund, vehicle finance house etc to discuss premium relief, payment holidays and other options. Do you have investments you can sell? Could relatives or friends help you out with a loan? Can you sell your car and buy a cheaper car? Are there any household items you could sell? Can you borrow money against your mortgage bond?

What are the consequences of taking money from my pension fund?

The first prize always is to leave your retirement funds intact. Research has shown that less than 3% of the population can retire without drastically downscaling their standard of living. The problem is that the less you put away for retirement, the less you are going to have to live from when you are old. If you have other assets as well, such as investment properties or businesses, to augment your retirement portfolio, the decision to take money from your pension fund will be less risky. Provision has been made for payment holidays, when you do not have to make contributions or may reduce your contributions for a certain period. It is, however, important to fully understand the impact, including the tax implications, and to make sure that no fines are levied, so that you may make an informed decision.

Should I try to get a mortgage bond in order to remain liquid, given the low interest rate?

As jy geen ander opsie het as om skuld aan te gaan nie, is ’n verbandlening sekerlik die kostedoeltreffendste opsie. Huisverbande bied meestal die laagste rentekoers en dit kan die beste opsie tans wees indien jy kan kwalifiseer vir ’n tweede verband of om van die beskikbare oorskot kapitaal wat jy reeds terugbetaal het, weer te leen. Wees egter bewus van die risiko wat met ’n verbandlening gepaardgaan – as jy nie die paaiemente kan volhou in die toekoms nie, is daar ’n moontlikheid dat jou huis teruggeneem kan word.

What is the best credit solution?

With any form of credit you want to pay the minimum interest. Interest-free loans or store cards or credit cards offering a 55-days interest-free option, for example, if you pay the instalments before the due date, therefore always are the best option. Otherwise, use interest rates as guideline. Look at different options at different organisations before you decide – a 0,25% cheaper option can make a huge difference. Mortgage bonds usually offer the lowest interest rates and this may now be the best option if you qualify for a second bond or to borrow from the available surplus capital you have already repaid. Keep your eyes wide open for cheating during this time and stick to registered financial bodies.

Could you prioritise my basic expenditure, what should I first stop paying if I have to?

First look for any debit orders that are still active for services you are not using any more, even for a very small amount, and cancel them. First get rid of expenditure items that are not essential for survival, such as:

  • Subscriptions – magazines, gymnasium, sport clubs, book clubs etc.
  • Beauty treatments, hairdresser costs and other personal requisites.
  • Take-away coffee, instant meals, delicacies, entertainment and recreation
  • Additional cell phone packages and internet packages not being used

Regarding any expenditure or debt involving a contractual obligation – contact the organisation concerned and make arrangements for relief. Be sure to negotiate with the organisation regarding this type of payment and do not simply stop paying.

I have shares but the market has crashed, should I sell if I need cash?

The golden rule with investments and specifically shares is to leave your investment as it is when markets decline, because the market will eventually recover and prices will go up. When shares are sold in a time when markets have shown sharp drops, there is a strong probability that you will suffer a loss on your investment. If you need cash urgently and have no other option, it is a better option to sell investments such as shares, rather than to incur debt to keep your head above water, or alternatively to postpone incurring debt as far as possible. Just bear in mind that, depending on the share price when you bought the shares and the price when you sell them, there could be a tax implication of you make a profit, and you have to make provision for this.

ABOUT YOUR MONEY

Travel insurance


By Wilma Bedford With the gradual opening of international borders after the lockdown you are perhaps considering a holiday, provided the new rules regarding quarantine and your pocket allow you to. The price of your ticket and the associated travelling costs are tempting you to cut back on your travel...

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FINANCIAL SERVICES

RETIREMENT PLANNING
Recent research shows that only 4 out of every 100 professionals will be able to retire independently one day. Is your current retirement annuity adequate? How can you make extra provision for your golden years? Solidarity Financial Services offer excellent advice that will help you to make provision for your own unique needs as well as those of your loved ones.
Click here to find out more.
LIFE INSURANCE:
INCOME PROTECTION,
AND DISABILITY COVER
No one wants to think about it but it is a reality that fate can strike at any day, minute or second. Therefore, before you even consider saving or investing money, you have to see to it that your current income is protected.
Click here to find out more.
SHORT TERM INSURANCE
What do you pay monthly for your car and household insurance? Are you satisfied with the service and benefits your current service provider offers? Are you not sure if you would have adequate cover should one of your valuable possessions be stolen or damaged? Let us review your current insurance profile and in so doing you can save loads of time, money and effort!
Click here to find out more.
INVESTMENT ADVICE AND
REVIEW OF YOUR
EXISTING PORTFOLIO
Are you in two minds about buying that beach cottage or rather investing those extra rands? Solidarity Financial Services offers members excellent, professional and thoroughly researched investment advice.
Click here to find out more.

DEBT COUNSELLING

The financial welfare of our members is very important to Solidarity
Debt counselling is a process that was introduced by the National Credit Act to assist consumers who have high debt levels and are in trouble. The aim of debt counselling is to restructure debt and establish a repayment plan that is supported by creditors or that is found by the court to be fair in the circumstances.

In other words, it is a form of rehabilitation that carries on in a structured manner until a consumer’s debt levels return to “normal” and he/she can function normally like any other consumer who controls his/her debt levels.

Click here to use our free debt counseling calculator

WILLS

FREE FOR SOLIDARITY-MEMBERS
If you are interested in such a service the drafting of a will is one of the many services Solidarity offers, and Solidarity will also handle your estate after death.

E-mail fineks@wvs.co.za
Fax: 086 639 1999
Phone us for more information: 012 362 1552.

Click here to download the form.

BUYING A NEW CAR

MOTOR FINANCE
WHAT WILL A NEW VEHICLE COST?

Although buying or selling a car is exciting, some people experience this as pretty traumatic. They struggle to decide which model they should choose and how to get financing, and find the paper work attached to a transaction problematic. Solidarity Financial Services will attempt to provide information that will make things so much easier for you.

Click here to calculate the cost of a new vehicle.

INDICATORS

DAILY INDICATORS

QUESTIONS & ANSWERS

Am I entitled to know why my rental application was declined?

Yes, reasons for rejecting your application for rent might include your credit profile, affordability or suitability such as "no pets allowed in the complex”. Your application may not be rejected due to discrimination on the grounds of race, gender,  pregnancy, marital status, sexual orientation, ethnic or social origin, colour, age,...

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Buying property: Why must purchasers pay transfer fees and the seller chooses the attorney?

Question: “I’m buying my first property. I’m quite nervous about everything and a friend of mine who is a conveyancer said she would help me with the transaction. However the seller is refusing and insisting that his attorneys must do the transfer. If I am the one paying the transfer...

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Sectional title: What to do about unnecessary special levies

Question:   What can you do about unnecessary special levies? What constitutes an emergency that justifies raising a special levy and what recourse does the owners have if the trustees raise a special levy for expenses that are not deemed an emergency?   Response   While the term “emergency” is...

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