PLANNING POINTS:
We’re living through a crisis - there’s no way to sugarcoat it. The coronavirus lockdown has hammered the economy, state-owned enterprises are as wonky as ever, and our government seems incapable of doing anything to sort out the mess.
And that’s just South Africa. The US is battling political incompetence and rising social unrest, China is reverting to increasingly authoritarian control, and in the UK it’s minister scandal after minister scandal. Don’t even get me started on climate change.
With all that in mind, it’s tempting to cash out, put your money in a suitcase and live on a farm in the Karoo, as far away from everything as possible. I hear you, but experience has taught me that it pays to keep your emotions in check during a period of upheaval. Here are some tips to ride out the storm.
Stop obsessing about the news
The media is a business that relies on clicks and views to drive sales. It’s their job to sensationalise things and to prey on our internal fears. Take a step back. And stop scrolling endlessly on social media, becoming outraged at comments made by anonymous strangers. Fear breeds panic, and the last thing you want to do is panic because that’s when mistakes are made.
You can’t control what Donald Trump says, so rather focus on the things you can control, such as your spending. Start small with things, such as debit orders - do you need all the services you’re paying for? Check the fine print of your cellphone contract and see if you can get a better deal.
Go through your insurance schedules with a fine-tooth comb and weed out all the non-essentials. You’ll be amazed at how much money you can save each month.
Review your investment goals at the same time. If your short-term goal had been to travel overseas, which is now impossible, reinvest the money. Or plan a cheaper, local-is-lekker holiday for after lockdown and bank the savings.
If you’re worried about retirement but you’re a decade or more away from retirement, relax: there’s plenty of time for the market to recover and for your investments to bounce back.
Look after yourself
so you can help others
It’s easy to confuse anxiety about your health with financial anxiety, but don’t let the former influence the latter. In other words, don’t make rash changes to your portfolio to prepare for a fictitious, worst-case health scenario. You obviously need to have the right medical and life policies in place, but don’t over-invest in health out of fear.
Instead, during this crisis period, prioritise practical health solutions such as exercise and sensible eating - and physical distancing. Physical health has a tremendous influence on mental health. If you look after yourself, your stress levels will be reduced and you’ll have more capacity to help others around you. It’s like when the air hostess does the pre-flight safety demo: put on your own oxygen mask, then assist the person next to you.
Don’t be tempted to gamble
If you’re lucky enough to have some cash in hand during this period, it’s very tempting to try to time the market when it’s in a dip, or to invest in some weird and wonderful scheme promising enormous returns. Don’t be sucked in; stick to your plan. Remember, you’re in it for the long haul.
Check your fees
This is a great time to investigate whether your money is working hard enough. Do you feel that you’re not getting value from the professionals who are managing your portfolio? Communicate. Ask them to justify the fees they’re charging, and whether your investments are diversified enough. Implement a long-term, analytical, data-driven strategy so that you’re smartly invested during the next upturn, to maximise your gains during the market’s best-performing days.
That’s not to say you shouldn’t consult a Certified Financial Planner. A trusted professional can add enormous value - he or she will be able to bring experience to the table, offer objective advice, act as a sounding board, and suggest innovative structures and investment solutions that might not have occurred to you.
Most importantly, try to remain positive. Creativity is stimulated during tough times, and adversity can breed opportunity - but only if you’re open to it. It’s hard to find a silver lining right now, I know, but keep things simple, look after yourself, and I’ll see you again on the other side.
Hardi Swart, a Certified Financial Planner professional, is director of Autus Private Clients and Financial Planner of the Year 2019.
PERSONAL FINANCE