Right size your spend and manage your debt
Right sizing and tracking your spending is one of the most important steps you can take during this time.
Right sizing
Here are a few immediate things you can look at to right size your spending during lockdown:
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Take advantage of this stay-at-home period to free up as much extra cash as you can.
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While your spending may increase on things like electricity and water or airtime and data whilst you are at home, try to limit this as far as possible and see how you can work smartly to save.
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Spending items likely to decrease during lockdown includes fuel and transport costs, lower interest cost after the 200bps cut in interest rates, cosmetics like makeup, perfume, etc., spending on restaurants and takeaways, etc. Some other service providers are also giving relief, like certain gyms freezing their gym membership payments. This is money you can directly free up and direct to your savings or use to cover instalments and debit orders.
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Start thinking about debt consolidation and if that would work for you. If you consolidate your small unsecured loans (e.g. store cards, micro loans, etc.) into one easy to manage loan with a single account fee and a lower interest rate, it could reduce your monthly premiums and free up money to direct towards your other immediate needs/commitments. However, that being said, approach extra credit and debt with caution at this stage and only from authorised financial service providers.
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Critically look at your other spending and payments and see if there is anything you do not need or make use of that you can either reduce or forego, and separate things that you may want, versus what you actually need.
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If you have a family or other dependents, this is an ideal time to have the tough we-need-to-cut conversations that we often avoid or postpone for 'one day'. Sit down with your loved ones and discuss what everyone can contribute to help the family's finances.
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Important: It may seem tempting to cancel insurance premiums at this stage but these are non-negotiable items on the budget that you should keep on paying. If you have more than one funeral policy, by all means relook if you need it. Unfortunately during this time a person may still have an accident, your home content or home structure might get damaged, etc. so it is important to have insurance in place if the worst does happen.
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If your income has not been impacted by COVID-19, put this money into a savings account (so that it is not in your normal transactional account, tempting you to spend it) and that you can access in case of emergency. You can also use this to 'pre-pay' your debt. With the Reserve Bank lowering interest rates with 200bps - if you keep your credit payments similar as before, you can pay off your debt sooner. Make sure that you are actively building up your emergency savings and/or pre-paying your debt, you might come to need it in the days ahead.
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If your income has been impacted by COVID-19, you can also use this money towards paying your existing credit agreements. See if you credit life protection plan will potentially pay out in this time. This is especially a possibility if you took out a loan after 9 August 2017. These policies generally could cover your credit premiums for up to 12 months.
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If you have been managing your accounts with good banking behaviour, you may qualify for a 3 month payment break with Covid-19 cashflow relief offered by FNB. Visit the FNB App, click on the COVID-19 icon > For Me and apply for the Covid-19 Cashflow Relief. There are a few questions you will need to answer and you should get feedback from FNB within 7 days.
Track your spend
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Go to nav» Money on the FNB App to track your spend. (FNB App -> nav-igate life -> nav» Money)
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Visit 'My available funds' on nav» Money, where you can see if you have enough money to cover your upcoming debit orders. If it is still a bit tight, click on the 'Other funds available' button. It will show you where you can get additional funds, like using your available eBucks, savings or existing credit facilities.
Manage your debt
We have covered ways that can help you meet your current credit repayments above. Another very important element in managing your debt is knowing what your credit score is and how you can improve it.
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Your credit score is important as it shows financial institutions and other credit providers such as banks how responsible you are with managing your credit repayments. So every time you apply for credit, miss or make a payment - this is recorded on your credit profile on the Credit Bureau.
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What are the things that positively impact your credit score? Making payments in full and on time, not applying for lots of credit over a short period and not maximising out your existing facilities. If you don't do this, it can also negatively impact your credit score. For example, being late on payments or missing payments, applying for lots of credit over a short period of time, maxing out your existing credit facilities, having a judgement against you or filing for bankruptcy will all negatively impact your credit score.
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Why is a credit score important? it shows the lender, whether it be for financing a home, or a personal loan, how you handle money and will affect whether you are eligible for credit as well as the potential interest rate and/or terms you will pay if they do give you credit.
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Check your credit score on the FNB App -> nav» Money -> My Credit Status. This will show you tips on what some of the ways are that you can improve your credit status.
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You can also visit My Credit Status inside nav» Money to make a payment arrangement for your FNB credit products.
