Recovering Your Finances

 

1. With so many people right now in financial difficulty on account of Covid 19 what can they do to start taking control of their finances during this time?

There are quite a few strategies we would recommend but I will share 5 key strategies that will get them on the right path:

• We would start off by recommending that persons create a budget—a plan for how to spend your money each month that is based on how much you typically earn and spend. Write down your income and all your expenses, and then subtract the expenses from the income to determine your discretionary spend. At the start of each month, set up a budget to allocate how your discretionary funds get spent. Track the spending over the course of the month, and at the end of the month, determine whether you stuck to the budget. If you spent more than you made, fix your budget by cutting unnecessary expenses or by devising a plan to earn more. Implement the revised budget the next month to start living within your means.
   
• Another recommendation would be to try to cut your monthly expenses. While you may not be able to reduce certain fixed expenses, such as rent or a car payment, without drastically altering your lifestyle, you can reduce variable expenses, such as clothing or entertainment, by being flexible and thinking frugally. You can, for example, reduce electricity consumption to lower your utility costs, choose a cheaper cable package or remove your cable altogether and purchase more affordable items at the grocery.

 

• Another way to help you curb your spending and get your finances in order is to go on a spending fast. This is when you stop spending money for a set period of time. Often, these are month-long periods of curtailed spending that make exceptions only for essential spending categories, such as food, transportation, and recurring bills. If you're willing to live like a minimalist for a brief period of time, commit to this challenge to pad your savings account, change your habits, and evaluate what you need as opposed to what you want. The experience may even permanently improve your outlook on money.

 

• To take control of your finances right now, open and direct money into interest-bearing savings account on a regular basis (every week, month, or a certain time of year, for example). This may be money that you save on your grocery budget each month, a set amount that you put aside from each pay check, or an amount that you allocated in your budget to save each month. No matter which option you choose, and no matter how little you save, look for ways to increase your savings over time. Small gains will amount to big returns over the long run.

 

• Last but certainly not least we recommend you reach out to a financial advisor at your bank to help you put together a financial plan. A financial plan is a timeline for the big milestones in your life. It's similar to a budget, but it covers a longer time horizon of 10, 20, or 30 years down the road, whereas a budget is a short-term plan for the weeks or months ahead. The two documents work hand in hand, which is why a budget is often a component of a larger financial plan. These plans can also help you with your finances by prioritizing your goals, as it is often more effective to focus on one or two financial goals at a time. Your financial plan should include events including buying a home, saving for retirement, and paying for your kids’ college education.

 

 

2 What can you do to help my kids become more financially responsible?

We recommend 5 strategies to really get your kids on the right path.

• Open a regular savings plan for your kids and encourage them to contribute monthly. You can offer a savings incentive and match what they save.
• Teach your kids how to budget and include a portion of their allowance towards saving for future purchases
• Financially reward your kids for their contribution to the home. These rewards should be for extraordinary contributions not everyday chores.
• Buy your kids some shares
• Invest some capital in a unit trust and reinvest the earnings

 

3 Education is so expensive? Should I get an education loan for my child?

We won’t tell you not to get a loan but we do strongly recommend again that you save for your child’s education immediately after the birth of your child. This way, you should have about 18 years to save for graduation and 21 for higher studies. However, despite starting early, one can still fall short of the required corpus. This is where education loans come in. You might want to consider using a student loan calculator to help you estimate your monthly loan payments so you can determine how much you should be saving per month to ensure you have sufficient to cover all university-related costs including, books, housing, travel etc.

 

4 How important is life insurance when planning for my child financially?

It is important for you to make sure you have your own insurance policy in place in case of any unforeseen circumstances. But we also strongly suggest getting a child’s life insured; apart from having the best child plan in place. Also, pick a child insurance plan that offers extensive coverage and comes with an array of benefits.

 

5 With this in mind how old should my child be before I create a Will?

This is not a topic that many young parents want to discuss, but as long as you have assets you should prepare a Will, that will include the naming of a Guardian to oversee your child’s interests in the case of your untimely death. This Will can be amended over time.