The Covid-19 pandemic and the related economic impact has taken a toll on businesses, jobs and income levels across socio-economic sectors, forcing everyone to take stock and reconsider their financial plans. Most of us are feeling the effect of the pandemic from our wallets to our accounts.
The spread of Covid-19 changed the global landscape, and affected our financial, professional and social environments. The lockdown necessitated by the pandemic was a very difficult period for most families. Parents had to become educators, cleaners, coaches and cooks overnight. In addition to the new roles we have had to adapt to, many have lost their source of income or are victims of salary cuts, which has made survival very difficult. Family members with jobs have had to bear the burden of new dependents, as it’s difficult to ignore the pleas of those who are suffering.
Media reports in South Africa state that there have been over 3 million job losses in 2020 mostly due to the pandemic, and these job losses have had a huge toll on household finances. Additionally, these job losses have resulted in 52% of working metro South Africans now bearing the burden of supporting family members and this is confirmed by the 2020 Old Mutual Savings and Investment monitor. This responsibility is colloquially known as ‘Black Tax’, and is a highly sensitive and complex topic. We acknowledge that the term ‘Black Tax’ is not acceptable to all, and some take issue with it, however, we are discussing the concept of supporting family members and can simply call it family financial support.
As a Finance Coach and facilitator, my observation is that most people feel conflicted about
financially supporting family members, some people describe the guilt trips they are put on by their parents or extended family members. Sadly, there are also those who expect handouts and/ or waste whatever is given to them on frivolous things. Some of the negative aspects include the fact that some individuals fall into debt in order to keep up with family expectations. There is a great deal of anxiety that goes hand-in-hand with the responsibility to support your immediate or extended family, while simultaneously achieving your financial and career goals. Financial support to family members is linked to complicated emotions and must be approached delicately.
Post lock-down statistics from SADAG (South African Depression and Anxiety Group) show that 46% of South Africans are now facing financial challenges in addition to 55% who have displayed symptoms of anxiety. Financial challenges can cause numerous other problems in the family and in the home. Marital problems, domestic violence, the abuse of children, alcohol and substance abuse are all possible results of financial problems in the home.
How does one survive or even thrive in these difficult financial times?
Know Your Numbers: More than ever, it critical for us to clearly understand the status of our
personal finances. Most of us don’t know exactly where our money goes once it lands in our
accounts, and as such, it is important to go through our bank statements and understand exactly what we spend our money on. To create a financial plan, you first need to know where you are. A financial inventory or ‘Know your numbers’ exercise gives you a overview of exactly what’s happening in your finances.
Eliminate debt. Many companies have recently been inundated with requests for salary advances, and companies which provide personal loans have a huge number of new clients. We all have no idea of when the economy will be vibrant again, and as such financial plans have been difficult to pin down. Loans seem like the easiest short-term solution to financial challenges, however, the road out of debt is not easy, especially with an unknown future. In order to manage stress, get rid of debt as quickly as you can.
Build Your Savings. The reality is that most of us aren’t saving enough and most of us have little or no money put away in savings. It is important to build savings as it allows you to enjoy greater security in life. If you have savings, you are able to manage when unexpected expenses pop up, like medical bills or breakdowns. The Covid-19 pandemic made us realise that bad things can happen at any time, and we need to be better prepared.
Have a clear goal. Setting financial goals is essential to building wealth and setting our finances in the right direction. Different people will have different financial goals. Irrespective of what you are working towards, especially in your finances, goal setting is critical.
Don’t give yourself excuses.
Start as soon as possible, and start small.
We all have no idea of when the economy will be vibrant again, and as such financial plans have been difficult to pin down. It is still important for us all to strive for financial freedom and stay focused on the goals we set ourselves before lockdown.
Planning for the future is still a key to keeping us motivated. Also, don’t commit to new debt when your future income is uncertain. Finally, don’t lose sight of all the fabulous things you are set to achieve. At the end of it all, this too shall pass.
