When the going gets tough... by Sanlam Liquid
Times are tough. The world economy is in dire straits, and the rest of us mortals are feeling the effect of the pinch. We feel it in our shopping trolleys, we feel it in our petrol tanks, we feel it in our school fees, and we feel it in our savings accounts . . .
Rene Roux, head of Sanlam Liquid, say we have two options. Pretend nothing’s happening, or face the music.
“Anyone with a sense of responsibility knows that the first option is simply not on the cards. In fact your reaction to the dilemma can spell the difference between success and failure. Seeing your glass as half full can indeed influence your reactions in a manner that can positively reposition your finances in tough times.”
Roux says that while each one of us will experience the crunch in a different manner, there are a few golden rules that can help us through this period:
Firstly, she says, we need to know that this too will pass. “Markets go up and they go down, and while this year has been unprecedented in the world economy, things will get better again. The danger is that we forget too soon and that we don’t stick to the lessons learnt in tough times.”
When the going gets tough, the most logical place to get advice is from a qualified and accredited adviser, she says. “Why try to go it alone when there’s help around? A trained adviser can help you to focus on the things that still really matter – like maintaining your savings, and your life insurance policies, and your risk cover. Because if you think things are bad now, wait until you lose the breadwinner in your family and realise that he or she has cancelled their life assurance policy!”
Roux says once you’ve come to grips with the basic rules of where to cut on expenses and where not to cut, you’re on the road to preserving your wealth.
“The next step would be to make sure that you don’t give up on your savings account. Having spare cash for emergencies is essential.”
Getting rid of your debt is just about on par with ensuring that you maintain your savings, she says. “Your debt costs you money and this is the last thing you need right now. Start paying it off – even a slow, committed start is better than none at all.”
“Then start looking at your household expenses such as ways to save on electricity, and other luxuries like garden services. This is also a good time to re-evaluate your weekly or monthly grocery-shopping list. Keep a record of every item you buy and shop around for better prices.”
She says a bonus or 13th cheque could be spent paying for a child’s school fees or university fees upfront wherever you get a discount for doing so. Otherwise, it may pay you to rather pay on a monthly basis, and keep the cash in a high interest account – such as a money market fund.
“If you have any money available for investing, then this is clearly the time to go full throttle, as shares in local and offshore markets and even property are currently lower in price. Remember the rule of investing is to buy low and sell high. This could be the time to buy, but first speak to your financial adviser to analyse your situation to enable him/her to make an appropriate suggestion that will meet your needs.”
Roux says the key to surviving the economic turmoil is to work according to a plan and to stick to the basics: “Get advice, save a little every month, don’t let go of your retirement savings plans, don’t cancel savings and other policies that can save your family from total distress, invest if you can – and continue to see your glass as half full, as your mindset can make all the difference.”