This archive report was first published on 13 May 2020.
As the Covid-19 pandemic continues to disrupt our lives, many of us are facing reduced income or even job loss. Rina Hicks, operations director at Faida Investment Bank and author of Money-Wise: Create, Grow and Preserve Wealth, offers valuable insights on how to adapt and thrive in this challenging season.
According to Hicks, accepting the situation is the first step towards recovery. 'We are not going back to where we were before,' she says. 'We need to anticipate the worst, even as we hope for the best outcome.' Hicks emphasizes the importance of creating a financial plan that responds to the new reality, allocating assets and apportioning income to ensure basic needs are met.
One of Hicks' key recommendations is to beef up emergency funds, aiming for at least three months' worth of monthly expenses. For those who have lost their jobs, she advises taking time to assess how long savings will last and developing a spending plan that cuts expenses as much as possible. If extended family depends on financial support, it's essential to communicate the situation to them, allowing them to make necessary adjustments.
Despite reduced income, Hicks stresses that saving should not be the first thing to cut out of the budget. 'Your expenditure expands to your income,' she says. 'We find it so hard to save irrespective of how much we earn. It is possible to save.' Hicks suggests looking for ways to save on necessities or essentials, continuing to save as much as possible while making cuts on spending.
Another crucial tip is to cut out non-essential expenditure, such as entertainment. Hicks cites research by PwC showing 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,' she advises. Instead, read more, and adopt measures like keeping hair and nails easy to manage at home to save more.
When it comes to essential expenditure, Hicks suggests being smart about spending on food and shelter. For instance, switching to plant proteins like legumes can be healthier and cost-effective. Simple measures like switching off lights not in use and using natural light can also help manage electricity costs. If possible, consider moving to a cheaper house or negotiating a rent reduction with the landlord.
Lastly, Hicks emphasizes the importance of taking care of one's health during this challenging season. 'The last thing you want right now is to get sick,' she says. If job loss has caused stress, Hicks advises talking to someone, whether a friend, loved one, or a counsellor or therapist. There are also relief funds available, such as from religious institutions or friends' ability to share Safaricom Bonga points.
For those with loans, Hicks cautions against ignoring obligations. 'Talk to your lender and renegotiate the structure of your loan to spread it out to a longer period,' she advises. Lending institutions are willing to negotiate with SMEs and individuals going through a tough season.
As Hicks quotes Jack Ma, '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.'
