Financial lessons from a lock down

Over the past week we’ve been forced to lock down our lives and find new ways to live, work and socialise in the confines of our own homes. Most of us have managed to successfully adjust to this new way of being and, in doing so, are likely to have learnt some interesting new things about ourselves. When it comes to money and finance, here’s what many of us have learnt during this lock down:

Redefined luxury versus necessary items

In recent weeks, many of us would have undertaken ruthless budgeting and cost-cutting, and many of us will have revisited the meaning of ‘luxury item’. With limited access to shops and goods, massive delays in online deliveries and depleted stocks, items that we previously thought of as basic necessities may now be regarded as luxuries. This may have a long-term effect on how we budget and shop in future.

Exercise costs nothing

Most of us have probably realised that gym membership fees are a luxury and that exercise is free to everyone. A small rug or a square patch of lawn is sufficient space to conduct a full-body workout. If you’re not sure how to go about exercising, Google Play Store is loaded with free exercise and yoga apps, and there are literally thousands of free YouTube workout videos available. If you’re not convinced, bear in mind that a South African couple living in Dubai recently ran a full marathon by running more than 2 100 laps of their 20-metre balcony in a time of just over 5 hours.

We only budget in a crisis

Budgeting is a bit like booking a dentist appointment – you only really do it when there’s a crisis. Having avoided budgeting for years, many people are now undertaking careful budgeting to cut costs wherever possible and to plan for the lean months that surely lie ahead. If nothing else, this crisis has highlighted the importance of budgeting and cashflow management.

There’s always room in the budget

You might have been fairly confident that there was absolutely no wiggle room in your budget – until now. Downturned markets and an economy that is likely to contract significantly over the next few months has resulted in much more rigorous budgeting for many South Africans. Budget items that we thought were absolutely non-negotiable have fallen by the wayside, and we’ve been forced to re-evaluate each line item through a completely new set of lenses.

Our emergency funding was not enough

When setting up our emergency funds, most of us would have made provision for the standard three- to six-months’ worth of income, which is really just an industry benchmark. Think emergency fund and most of us think burst geyser, injured pet or emergency travel. Whereas holding six months’ worth of income in an emergency fund may have sounded excessive before the pandemic, it’s likely that we now have a new appreciation for the importance of emergency funding.

We spend too much on convenience goods

Without access to Uber-eats, take-aways, coffee-on-the-run and ready-made meals, we may have discovered just how much of our disposable income we spend on convenience goods. Lockdown means no traffic, fewer commitments, less ‘busy-ness’, and more time to plan and enjoy homemade meals. If you’re working from home, perhaps you’ve come to appreciate how easy it is to make your own flask of coffee to take your ‘home office’ and how much this is likely to save you in the future if you adopt it as a habit.

We buy too much stuff that we don’t need

With shops and retailers only allowed to sell regulated essential goods, we no longer have access to non-essential items – and this is likely to save us a lot of money over the next few weeks. Clothes, make-up, jewellery, gadgets and other nice-to-haves are no longer available to us, and many of us will have realised how much we actually spend on things that we don’t really need.

We’re not immune to fear, panic and greed

The Coronavirus pandemic has created fear and panic around the world, and we are not immune to these emotions. Whether we’re investing, shopping or caring for our loved ones, the pandemic has caused us to feel fearful and panicked to varying degrees. Fear and panic cause people to cash in investments, stockpile toilet paper, wear dish gloves to the shops and even unwittingly share fake, but compelling, news.

Our optimism bias prevents us from estate planning

In the absence of a global pandemic, most of us believe that accidents and tragedies are events that befall others, and that we are immune to such occurrences. With rising infection rates and our first recorded deaths, many South Africans are feeling somewhat more fallible and more compelled to draft a Will and get their affairs in order.

Medical aid is not negotiable

No one is immune to the Coronavirus and ensuring that we remain covered by our medical aid and gap cover is a priority. While 80% of people infected by the virus are likely to experience mild symptoms, the other 20% will suffer severe symptoms that require medical intervention, with a small percentage being fatal.

We are not good at delaying gratification

Over the past few weeks, most of us would have experienced frustration at not being able to have our online orders fulfilled as quickly as normal. Gone are the days of groceries being delivered within the hour, or same-day delivery for that tech gadget we simply had to have. Most retailers are struggling to fulfill online orders within two weeks, and the availability of food items can no longer be guaranteed. Our ‘instant-everything’ lives have been disrupted and we are getting a free lesson in delaying gratification.

We default to retailers rather than local business

With most online retailers struggling to meet demands, we’ve started to actively seek out local businesses who provide fresh fruit, vegetables, organic meats, free-range eggs, honey and dairy products. This could be the push that we all needed to get us supporting our local farmers and small businesses – with added health benefits and less environmental impact.

We don’t read fine print

We generally don’t read the fine print – until we have to read the fine print. Whether it’s checking out the exclusions on our life cover, stopping our retirement annuity contributions or checking the terms of our credit card repayment terms, this crisis has got us all reading the T & C’s on our financial products, and making us better educated consumers at the same time.

Annual reviews are more important that you think

Many people are using this crisis to review their financial plans, trim back on life cover, reduce their drawings, stop their investment premiums or recalibrate their investments, which only serves to highlight the importance of an annual review. Regular reviews of your financial plan will mean less tweaking, adjusting and panic in times of crisis.

We have more than enough

This lockdown has highlighted the massive social divide that still exists in this country. A lock down in a comfortable home with a garden, swimming pool, enough food and space for personal privacy is a far cry from what those trying to lock down in abject poverty are having to endure. Many of us are using this time for deep reflection, much-needed rest, and to appreciate family togetherness. Many of us have also come to discover that what we already have is enough.

Stay safe.



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