A January Financial Reset That Actually Changes Your Year

It was 06:00 in the morning and the air felt crisp. I could hear the birds chirping in the distance and there was stillness in the air. As I stretched to prepare for my morning run, I gazed at the thick grey clouds that seemed to threaten today’s victorious accomplishment. I am by no means a Comrades marathon runner, but being able to summit those Bryanston hills consistently makes me feel like a champion. A pro in a league of her own. For my own sanity, I triple checked the weather forecast and it predicted light showers with a probability of 14% rain. I took a deep breath and decided that I was going to start and finish my run that day. Little did I know, Mother Nature had other plans. I had only been running for about 10 minutes when the light showers began. I brushed it off and didn’t think too much of it. Approximately 6 minutes later, what had seemed to be light showers became a downpour. In the distance, I could hear the neighbourhood lightning siren go off, and I decided there and then, I was not going to be buried as the wanna-be Comrades Champion. Fortunately, there were some office parks nearby, so I ran as fast as my legs could carry me to shelter. The security guards were kind enough to allow me to take refuge under the covered pavement at the guard house and my life was spared. I would live to run another day!

Reflecting on this experience, I thought, goodness me, this surely does portray how financial planning can be. You start with the perfect plan at the beginning of the year and you anticipate that there will be light showers here and there in the form of emergencies, and in some instances, it doesn’t just rain, it pours! How then do you manage or cope if unforeseen circumstances happen during the year? Here are my three tips to make sure you are thoroughly prepared financially for that thunderstorm:

1. Work on Building a Rainy-Day a.k.a. an Emergency Fund

It is not a coincidence; they call it that because the rain will come, but will you be ready for it? As a Certified Financial Planner, I recommend that you try to reach a goal of no less than six months’ worth of your expenses in your rainy day fund. If your monthly expenses are R30 000, then you should aspire to have a rainy day fund of at least R180 000. While this might feel like a daunting goal, it helps to break it down into smaller milestones that you can keep track of over time. As an example, you could start with a goal of building the rainy day fund to cover 1 month’s worth of expenses. You would then need to be clear on how much time you are committing to achieving these goals, which could be over 12 months. Once you achieve this goal, you then build on it until you get to your six-month target.

2. Ensure You Have an Appropriate Risk Management Strategy

Life happens, and we all know that. The fortitude of a financial plan is not in being risk and failure-proof, it is in having the right kind of measures that ensure you can weather the financial storm if it passes your way. Most people would agree with me that having an umbrella is one way to make sure you do not get wet. In the same way, making sure you have appropriate cover for household contents, for death, disability or dread disease claims, for medical emergencies, for retrenchment, for your motor vehicles or for your buildings is not just nice to have, it is a must have if you want to make sure you do not get drenched in the bills that follow unforeseen events like theft, accidents, retrenchment, health trauma and so on. Having appropriate insurance is a great way to protect you and those you love so that you not only survive but thrive after the storm.

3. Diversify Your Income Streams

Most of us have heard the adage: Do not keep all your eggs in one basket. The same holds true for your income streams. Never rely on one income stream. COVID taught us the profound lesson that money cometh and money goeth. The average millionaire has at least seven income streams and we can all take a page out of their playbook of success. How many streams of income are you earning? Consider the ways in which you can monetise your skills, existing assets, underutilised property or make your talents “bankable.” We all have something to offer as we solve the numerous problems that inundate the modern world. If that seems daunting, then consider earning interest, dividends or rental incomes through investing. The key is to find something you understand and that you are comfortable with and run confidently with it.

Until we meet on the streets of Bryanston during my morning run, commit to being ready to withstand the financial storms of life! You’ve got this!