Measures to take while adjusting to a lower income

The Covid-19 pandemic might have forced you to make-do with lower income, or even forced you out of a job, and “life as we knew it has shifted,” says Rina Hicks, the operations director at Faida Investment Bank and author of Money-Wise: Create, Grow and Preserve Wealth. Our ability to adapt, Hicks says, will be key in ensuring that we ride this season successfully. She offers tips on how to cope.

Accept the situation

“The first thing we must do is accept the situation. We are not going back to where we were before. For all of us, whether we are experiencing lower income or not, we need to anticipate the worst, even as we hope for the best outcome.

We all need to create a financial plan that responds to that. We need to figure out how to allocate our assets and apportion our income in a way that ensures that in all circumstances, there are financial resources to meet our basic needs,” Hicks says.

Beef up your emergency fund

If you are still earning an income, Hicks says, beef up your emergency fund and try to have at least three months of your monthly expenses saved up. “If you have another source of income besides your job, assess how you can leverage on technology to deliver that service or product so as to take that side hustle to the next level,” she adds.

If you’ve lost your job altogether, Hicks advises that you should take time to figure out how long your savings will last, and develop a spending plan that allows you to cut your expenses as much as possible. If your extended family depends on your financial support, let them know about your situation so that they can also begin to make necessary adjustments.

Yes, Hicks reminds us, you can still save even with reduced income. In fact, saving should be the last thing you cut out of your budget. “Your expenditure expands to your income. We find it so hard to save irrespective of how much we earn. It is possible to save. Look for ways to save on your necessities or essentials. As you make your cuts on spending, try and continue to save as much as you can,” she says.

Cut out non-essential expenditure

Refrain from spending money on expenditure such as entertainment which you can do without. “I remember reading some research by PwC a few years back that showed that Nairobi residents had the fastest growing spending in entertainment in Africa.

Entertainment is non-essential – reduce or cut out alcohol consumption and TV subscription channels,” Hicks says. Instead, read more. Don’t make any big purchases at this time, she says. Adopt other measures such as keeping your hair and nails and easy to manage at home to save more.

Be smart about essential expenditure

We do need essential items like food and shelter, but you can be smart on how you spend on them. Bacon and sausages, for instance, cost more than plant proteins (which, by the way, are healthier). “Switch your family to plant proteins like legumes. Change your shopping habits.

This means reducing your trips to the supermarket, because the likelihood of making impulsive purchases is higher, she adds. Simple measures to manage electricity costs, like switching off lights that are not in use and using natural light for as long as is possible, go a long way.

“Consider moving to a cheaper house if you are paying rent. Alternatively, negotiate with your landlord and request for a reduction in rent,” Hicks advises.

Take care of your health

The last thing you want right now is to get sick. If you’ve lost your job as a result of the crisis, the stress can take a toll on your health. Hicks advises talking to someone.

“Losing a job can be quite stressful because we are used to identifying ourselves with what we do. Talk to a friend or loved one. You never know what opportunity could arise from opening up to someone. If you can afford it, a session or two with a counsellor or therapist can help you process the loss. Despite the fact that this is a significantly challenging season, people are willing to help. Further, there are relief funds that you can tap into, from religious institutions’ care packs or food packages, to your friends’ ability to share their Safaricom Bonga points with you for shopping money.”

Negotiate loan payment

If you have a loan and are unable to continue making repayments, don’t ignore that obligation. Lending insinuations are aware of the current crisis.

 “Talk to your lender and renegotiate the structure of your loan to spread it out to a longer period. Financial institutions are willing to negotiate with SMEs and individuals who are going through a tough season. One should not ignore their obligations and think it’s all going to disappear. We must proactively engage those we owe money and work out a plan,” Hicks says.

Speaking of loans, Hicks cautions against taking one at this time. “I love what Jack Ma is quoted to have said to business owners: ‘For people in business, 2020 is really just a year for staying alive. Don’t even talk about your dreams or plans. Just make sure you stay alive. If you can stay alive, then you would have made a profit already.”