Tips for weathering COVID-19 on reduced income
The COVID-19 pandemic has affected several households financially and left them struggling to make ends meet.
Many people have been retrenched or terminated and have had to run their households on reduced incomes.
Republic Bank Economist Garvin Joefield spoke with Loop News and offered some tips to help families and individuals suffering the economic effects of COVID-19 manage their finances.
Make it a family affair: Joefield said anyone who has lost their job or a portion of their income - once they’re not living on their own – should sit the entire family down and explain the situation.
“Explain to them that as household unit we are in a situation where our income has been reduced be it retrenchment or partial income loss. Lay out the challenge facing the family and work out how you all respond to this challenge.”
Joefield said this will teach children how to unite and face challenges and will get everyone on board to reduce household expenditure.
Create an emergency fund: The economist said it is advisable to save as much and as often as people can, even in the current circumstances.
“Having an emergency fund helps in situations like these. Ensure your emergency funds can cover three to six months of expenses – your bills, groceries, rent, and mortgage.”
For those who don’t have a rainy fund, Joefield said it’s never too late to start.
He advised families and individuals to set financial goals and save towards them.
“It’s essential to save. This is important to steer a person from a financial wrong turn to a path of sustainability.”
Reduce expenditure by separating wants from needs: After explaining the situation to the family, Joefield said it’s important to put mechanisms in place to cut costs.
He said the best way to achieve this is to create a budget and stick with it.
“Differentiate. Draw a clear line between wants and needs. Some of the best ways to cut back on expenditure are to use cheaper brands, seek discounts and eat out less.”
He said people should not be afraid to ask for discounts at places like clothing stores and hardwares.
When it comes to entertainment, however, the economist said this was essential to family bonding time and should not be cut. He suggested that families get more innovative about entertainment and engage in more group activities like playing board games.
“It’s essential to differentiate what are needs and luxury items,” he stressed.
Put your skills to use: Joefield said many people have skills which are marketable and can be put to use to create an alternative source of income.
“For those who are retrenched, you’re probably good at baking or have skills as a handyman, so, you can put these skills to use when restrictions are lifted.”
He had advice to those who continue to be employed but are working under new arrangements, such as reduced working hours.
Joefield said these individuals should continue to be excellent employees.
“Employers don’t forget when someone puts forward their best in exceptional circumstances. Be the last person anyone would want to retrench,” he said.
Level up: Joefield said those who are out of a job but still living at home with their parents should use the time away from work to make themselves more marketable.
Access relief grants: The economist acknowledged that for those living on daily wages, their needs will be more immediate. He urged these individuals to apply for the available relief grants from Government – salary relied, rental assistance, and food grants.
“Sign up for these as soon as possible as soon as your (financial) situation changes because grants will take time to be approved,” he advised.
Don’t panic: Joefield said the best response to dealing with the effects of the pandemic is to keep a level head.
He acknowledged that this is sometimes easier said than done, but stressed that panicking could only lead to a worsening of an already not-so-great situation.
The economist advised against selling off high-value assets like the family vehicle and ending life insurance policies.
Instead, he suggested that families take a step back and assess the situation. He said they should start by ensuring they have a savings plan and make the best decisions for themselves and their long-term financial health.
Seek help: Joefield noted that some people may feel overwhelmed by their financial position and would require counselling.
Stressing that there was no shame in seeking help for their psychological state, he advised that people seek out Employee Assistance Programmes (EAP). Some workplaces offer sessions at no cost to employees.
He said while it’s not easy, those with dependents, in particular, must find a way to soldier on.
“Not everyone will bounce back and some people sometimes need to get perspective from others to manage their response.”
“It will be tough but we have to manage,” he said.