What to do after the payment holidays are over?

COVID-19 lockdown measures may have been relaxed to a certain extent as the country ease into Level 3, but for many consumers that won't mean the strain on their finances will suddenly become any less disruptive. Most of the 'payment holidays' that were announced by SA banks in March will cease at the end of June, but the knock-on effects of an economy in hibernation have only really started to emerge.

Many employees have had to take salary cuts (often 50% or more) as businesses try to steady the boat, and this is not likely to be reversed any time soon. Plus, once the banks revert to business as usual, consumers who had three months of payment relief will be open to legal action if they can't afford their established debt repayments.

As such, it’s important to take a good, hard look at your finances in the month ahead. Here are a few important guidelines we’re sharing with our clients at this time:

Manage household expenses as tightly as possible

If you don’t currently have a household budget that guides your monthly purchases, now is the time to draw one up. Take a good, hard look at where your money goes and see where you can trim the fat if possible. For instance, when you take care to track your payments, you could very well notice that your prepaid electricity bill is quite high, or that your water bill differs vastly from one month to the next.

Having this information in front of you makes it simpler to know where you need to focus your saving efforts. Remember, small changes can make a big difference in the long run. Switching off the lights when you leave a room, not using the dryer needlessly when the sun is out, and reusing your bath water to wash your clothing (completely possible with a sturdy bucket and some elbow grease) doesn’t take a lot of effort, but can have a big impact on your electricity- and water usage from one month to the next.

When it comes to groceries and food expenses, planning your meals makes a world of difference. Sit down with your family or housemates and decide on a weekly or two-weekly meal plan that works for everyone. Do your grocery shopping accordingly and keep an eye out for good deals on non-perishable pantry staples like oats, cooking oil, flour, tinned goods, long-life milk, pasta, peanut butter, etc. It takes some effort, but when you shop consciously, rather than just idly filling a trolley when you visit the store, the saving opportunities are endless.

Take a look at your contractual payments

If you are struggling to keep up with payments of daycare, gym memberships or any other monthly expenses that go toward something you don’t get the benefit of during lockdown, it’s time to take a look at the contract. Many businesses will claim that you are contractually bound to keep up with these payments even if they are unable to provide the service you are paying for, but COVID-19 is an unforeseeable occurrence that is not addressed in most existing contracts.

See if you can work out a payment plan with the provider in question to provide some budget relief, or seek professional advice if you are unsure whether you can exit a contract without opening up yourself to legal action down the line.

Don't put yourself at risk by cutting important payments

Expenses like medical aid, gap cover, retirement annuities, disability cover, and car- and home insurance really add up, and it can be tempting to opt out of these ‘in case of’ payments when times get tough. However, it’s important to realise that you can put yourself, and your family, at risk if you do. Put these in your ‘last resort’ column when you consider your budget, and try to make the payments on these for as long as you possibly can.

Ask for help when you need it

Don’t be too proud to ask for help. If you don’t have a go-to financial advisor who helps you to make sense of your finances when times get tough, it may be worth your while to consult a debt advisor. Just because you’re getting advice about debt counselling, it does not mean that you will get blacklisted or tarnish your credit record for all time. South Africa’s National Credit Act (NCA) is one of the most progressive in the world, and it was put in place to safeguard consumers, so put up your hand and ask for help when you need it.

Following these guidelines as you prepare for the end of the COVID-19 payment holidays will make it somewhat easier to absorb the financial impact. Feel free to reach out to the Libertine Consultants team if you would like some more expert insight on the matter. We’re here to help you regain control of your finances and live a life free of the stress of unmanageable debt.