Your financial wellbeing has never been more important – now is the time

Charles Mokondo

The outbreak and rapid spread across the globe of COVID-19 shocked the world and left many already struggling economies, and even strong economies, in trouble. The good news is that measures can be implemented to help individuals to cope with the situation. Iemas Insurance Brokers’ experts give their perspective on how to manage ones’ personal finances during this challenging time.

What is the most important piece of financial advice that you can give?

Charles Makondo, National Sales Manager: Financial Advisory Services: Each persons’ financial situation is different, however one tip I can give to anyone is to take stock of your finances – the way you spend no matter what your circumstances, definitely changed since the outbreak of COVID-19. Do not make the calculations in your head, sit down and make a list of all your expenses to compile your personal budget. Make sure that you understand how much your income is, what your expenses are and how both your income and expenses are affected now and going forward.

What steps can you take to remain financially stable if your income has been reduced?

Lize Badenhorst, General Manager short-term insurance: When you look at your budget, make sure that you highlight those items that might have medium- to longer-term financial impact if not paid. This will include your rent or home loan payment, vehicle finance installment, water and electricity, levies and rates and taxes (if you are a homeowner), medical aid contributions, home, car and personal belongings insurance, as well as your retirement annuity, funeral and life insurance products. If you have additional debt, make sure that those accounts are also included.

Is insurance not an expense that you can easily cancel to increase your cash flow?

Lize Badenhorst: Unfortunately, the opposite is true. The most important reason why canceling your insurance is a bad idea is, as we have seen with the outbreak of COVID-19, anything can happen. For example, during the lockdown period we’ve had instances where our clients claimed for hail damage after severe hailstorms in Middelburg and Kimberley. If they did not have insurance, they would have suffered major financial losses. As a broker, we have many insurance partners – some of which offer relief options and instalment reductions during this time. So, it is advisable to contact your broker to find out if there are any payment options available on your policy. Just remember that each insurer’s offering will be different and will be subject to terms and conditions.

Are there any other long-term consequences?

Lize Badenhorst: If you cancel your insurance policy completely for a period of time and reinstate it again later, you could be penalised for having a break in your insurance. Rather speak to your insurer or broker about payment break options. Apart from having to find money for unexpected loss when you are not insured, you will also end up with a higher premium when you later want to re-instate your insurance. Both will have a long-term negative effect on your finances.

Can you make changes to your long-term insurance (i.e. life and funeral) and investment policies?

Charles Makondo: You can always speak to a financial advisor about different cover options you may require or perhaps about more affordable products. However, canceling your insurance policies could have dire consequences, especially when there is a global health pandemic. Your Will and Estate planning should also be a priority and is essential for your life file – a file with all your important documents that your family will need, should something happen to you. In terms of your retirement annuities and investments – even though the markets have been negatively impacted, my golden rule is to stay put. Do not make any impulsive decisions, keep your portfolio as is – better to have some savings than having nothing for the future.

Is now the right time to draft or update my Will?

Wills

We all have a different way of coping and dealing with the national lockdown but the most important thing that we need to be mindful of is our health. A big part of staying healthy is to put preventative measures in place such as wearing a mask every time you go out, keeping a 1.5 meter social distance, sanitising, taking your vitamins, eating healthy and exercising regularly.

The same applies for your financial health. Prevention is better than cure, especially when you are no longer there. That is why now is a good time to get your affairs in order and make sure you have a valid Will so that your family is taken care of. Your life file goes hand-in-hand with your Will. This is a file (electronic and a physical file) with all your documentation that your loved ones will need; this file includes documents such as your Will, bank account details, details of all your assets and debts/accounts and mortgage. Watch this video to find out more: https://bit.ly/3czv3Nn.

Thus, it contains everything your loved ones need to carry on when you are no longer there.  If you do not have a Will then now is the right time to draft one. If you already have, a Will then maybe now is the time to review it. 

Here are a few tips to help you get started:

You do not have to panic. Thinking about death is scary and upsetting, however it is a reality. Thus, stay calm and try to think about it differently –rather than ignoring it, think about what you have and how you want to leave it behind.

Just do it. The more you delay compiling a Will the less likely you are to actually get to it, and the more you wait the riskier your family’s situation will get. Thus, get your Will in place as soon as possible, so that you do not have to worry about it and so that you can have peace of mind that your family will be taken care of.

Think about what will happen to your children. Your Will contains information on who will take guardianship of your children if they are younger than 18. If you do not have a Will in which you specify these details, then the courts will decide who will get custody of your children.

Start at the beginning. Speak to a credible service provider who is authorised to draft a valid Will. You can speak to Iemas Insurance Brokers about Wills and Estate planning by either calling us on 0860 043 627 or visit our website: https://www.iemasinsurancebrokers.co.za/secure-your-family.php. We can draft a Will at no cost to you and we have online options available during lockdown.

Source: https://www.sdlaw.co.za/use-lockdown-time-wisely-make-your-will/