5 Essential Finance Tips for The New Year

The Covid-19 recession has altered our financial goals and habits immensely. This is further reinforced when looking at statistics showing around 7.8M people in South Africa still out of work and others facing prolonged periods of reduced hours and reduced pay.

At the same time, a rise in Covid-19 cases is expected around mid-December to early January and could lead to the fourth wave in the country, noted Health Minister Joe Phaahla. Overall, there’s a lot of uncertainty, but a reason to be hopeful according to Business Leadership South Africa chief executive Busi Mavuso: “We are on the right economic trajectory – one that grows at a rate fast enough to absorb jobs and increase our per capita income levels. Delivery remains critical.”

With all this in mind, here are five key pieces of advice to consider for the new year.

1. Go for goals

Although the uncertainty of the past 18 months has been worrying for everyone, it’s still vital to consider your financial goals. How have they changed? It’s important to not be discouraged and keep doing what you’re doing – with them in mind. Don’t stop investing if you still have the means to do so; keep saving if you have the funds.

If this past year has made you rethink what’s important, though, it’s okay to make some adjustments. You have to do what will give you peace of mind, so prioritize what makes you feel most comfortable.

2. Focus on what you can control

Much is out of our control right now. But there are a few financial factors anyone can manage on their own.

Start by setting up debit orders for all of your bills, including rent or mortgage payments and utilities. Then if something should happen to you and you’re temporarily unable to deal with things, the bills will take care of themselves, rather than trying to explain to someone else how to pay your mobile phone bill.

3. Make sure you have a Will

“A will is one of the most important documents you will write in your lifetime. It sets out how your assets are distributed, and your last wishes are executed.” Advises Yassir Cassim, a Director at FMS Private Wealth.

“Not having a will can have dire consequences for your financial dependants. Should you die without one your estate will be distributed in terms of the interstate succession act.”

Whether you have a spouse and kids or not, it’s important to give someone else the capacity to access your financial accounts and make medical decisions for you.

4. Rethink impulsive decisions

The housing market has been particularly hot in the last 18 months, due to the historically low interest rate which has come down by 30% since the start of 2020, notes Samuel Seeff, chairman of the Seeff Property Group.

But be cautious about buying and moving. Just because mortgage interest rates are still low, it doesn’t mean you can afford a home right now or in the near future. Consider what would happen if you were faced with a salary reduction for example.

You should also consider what will happen if you have to return to your office permanently or find a new job. If you move to an area further away from your workplace, you might regret it. While you may be working remotely either frequently or full time; opt for buying only if you know you’ll stay in the house for five years or more.

5. Look for opportunities

Though minimizing your expenses won’t solve every financial issue, now is an opportunity to rethink your spending habits.

The easiest categories in a budget to make changes to are nonobligatory expenses like eating out, ditching meal-prep for pricey pre-made lunches, travel and spending on cosmetic things. Now is the ideal time to reflect on where your money is going and set budget limits on these categories for the future.

Just because you’re saving on other expenses such as petrol, it doesn’t mean you need to spend this money. Instead, consider putting it into your savings account to use for a rainy day.