“How long will my money last?” and “will I have enough to retire on?” are probably the most asked questions during RetiremeantTM Planning. Our aim as Planners is to make your money graph last beyond the age of 100 years, and during these discussions, the most likely responses we receive from clients are “don’t worry, I will be gone long before then!” or “I hope I don’t live that long!”
Whilst we fully understand this sentiment, we do need to be prudent with your RetiremeantTM capital and consider the unforeseen and “what if” events which could impact your RetiremeantTM journey. The 2008 sub-prime lending crisis is a prime example; unexpected illness or life changing events leading to unplanned expenditure is another – and so is Covid-19.
The aim of our Planning approach is to ensure that our clients maintain their lifestyles, in spite of market volatility or unforeseen events – we certainly don’t want you to have to cut back on your spending or tighten your belts when markets don’t perform the way we hope. But no-one could have foreseen the drastic impact of Covid-19 on our finances. Not only are the markets affected, but our lives have been impacted as well.
I write this article sitting at my dining room table, pondering where I can tighten my own belt (which is tough because working from home means my kitchen is only five steps away.) But I do have to revisit my budget, and I’d like to share some tips and thoughts to keep in mind in case you’re doing the same:
1. Automatic savings
None of us will be travelling or going on holiday in the near future. We won’t be going out for dinners or enjoying a weekend braai with friends or family, and we can only shop for essential items such as medicine and food. Our travel and fuel expenses will also reduce.
2. Payment holidays
This term has typically been linked to mortgages. Basically, it means that you take a break from your monthly payment, for a short period of time of one to three months. At the end of the holiday, your payments must start again. This means that your payment term will extend, for example by three months.
Insurers have also been facilitating payment breaks. You must be aware that you stand the risk of not having cover for the month that your premium is not paid.
Before making any adjustments to your monthly payments, please make sure you fully understand the consequence. We encourage you not to make use of payment holidays or breaks where possible.
3. Services that you are not using
Gyms across the country have been forced to close, with the larger gyms freezing your membership during the lockdown and therefore, your monthly payment.
Personal grooming trips to the hairdresser or barber, manicures and other treatments will also fall away in the lockdown period. I am sure many of us will use this time to pamper ourselves at home – at greatly reduced costs.
Domestic help is a tough one. Even though your gardener and domestic helper cannot come to work, we do encourage you to continue supporting them where you can.
4. Payments which may increase
Staying connected and reaching out to our friends, loved ones, and others in need with the help of technology, has been a positive experience. We are all learning much more about the technology available to us and it allows us to feel a sense of togetherness. We are using more data, but many internet and cellular providers have announced that they have reduced their data prices, which should be a big help.
If technology is unchartered territory, keep a lookout for Chartered Tips on how to stay connected with technology.
5. Non- negotiables
Covid-19 is a health risk. Your medical aid premiums and proper nutrition are more important than ever. We encourage you not to cut back in this area. Continue your medical aid premiums, eat healthily and stay as active as you can within the confines of your home. If you are left with no alternative, rather opt for a less comprehensive plan than cancelling your medical aid entirely.
Remember that your Planners are available telephonically or to meet with you online to discuss any question you have relating to your budget, the prevailing market conditions, or planning in general. We will get through this together – as American singer, Jimmy Dean said: “I can’t change the direction of the wind, but I can adjust my sails to always reach my destination.”
In an environment where we have little control over what’s happening, it’s worth considering the areas we can control. Tiffany Havinga and Kim Potgieter discuss some ideas on changes that can be made to your budget as a result of the Covid-19 virus and the impact it has had on our lifestyles and investments.
Chartered Wealth Solutions is an authorised financial services provider
(FSP no. 13909)