This War Is About to Hit Your Wallet — Here’s What To Do!

Hi Tribe,

Last year gave us a sense that things might finally be turning in the right direction. South Africa was removed from the Financial Action Task Force grey list, the rand showed some strength, and we had a few interest rate cuts from the South African Reserve Bank – if you listen to business news, this is what has been coined green shoots ( I wrote an article on these green shoot last year: https://www.womanandfinance.co.za/so/c9PgquKJR?languageTag=en)

There was a feeling of relief; like maybe, just maybe, we were moving into a more stable period.

But this year is shaping up very differently! And let’s call it what it is:  a stupid war aggravated by the US-Israel on Iran.

Now, even though this is happening thousands of kilometres away, it’s going to hit your wallet directly!

When conflict disrupts oil supply especially in a region that controls a significant portion of the world’s oil, prices spike. We’re already seeing fuel prices surge globally because of this war. And in South Africa, higher fuel costs don’t stay at the petrol station. They filter through our entire economy.

Transport will become more expensive. Food  will become more expensive. Everyday living becomes more expensive; that’s what is called inflation.

And when inflation rises, the South African Reserve Bank is likely to respond by increasing interest rates to try and slow it down. That’s when things really start to bite. Your bond repayments go up, your car finance becomes more expensive, and the interest on your credit cards, personal loans, overdrafts and store accounts increases.

So now you’re getting squeezed from both sides: the cost of living is rising, and the cost of debt is rising!

So what should you do? Here are four practical steps to protect yourself.

1. Build an Emergency Fund — Now!

If you don't have one, this is your most urgent priority. Aim for three to six months of living expenses set aside, but if you can stretch to nine or twelve months, do it. Your emergency fund should be easily accessible and liquid, consider parking it in your access bond (which also saves you interest), a high-interest savings account, or a money market account. The goal is that if something goes wrong; job loss, a medical emergency, a major repair — you are not forced into expensive debt to survive.

2. Kill High-Interest Debt and Think Carefully Before Taking On New Debt.

If you have extra cash or are expecting a windfall like a bonus or tax refund, use it to pay down your most expensive debt first — typically credit cards, personal loans, and store accounts. Do not take on new debt unnecessarily right now.

If you were already planning to buy a house or a car, pause and stress-test your affordability. Ask yourself: if interest rates rise by one or two percent, can I still comfortably afford this repayment? Do not buy at the very top of what you can afford today. Leave yourself breathing room, because rates will likely rise.

3. Don't Panic-Sell Your Investments!

If you have a retirement annuity, tax-free savings account, pension or provident fund, or any other investments, resist the urge to cash out when markets dip. Selling in a downturn locks in your losses permanently. Markets have always recovered over time, and they will again.

If you have a debit order investing into a unit trust/ETFs etc, keep it going. This is called Rand Cost Averaging: you buy more units when prices are low and fewer when prices are high, smoothing out your average cost over time. It is one of the most powerful and underrated tools available to ordinary investors.

One more thing: unless you are a proven, experienced trader, ignore the "buy the dip" noise on social media. You have no way of knowing how far a price will fall before it recovers. Don't try to time the market rather time in the market is what builds wealth.

4. Check Whether You Have Credit Insurance.

Go and pull out your latest statements for your bond, vehicle finance, credit card, personal loan, or any other credit facility. Look for a line item called credit insurance. Many South Africans discovered just how valuable this cover was during COVID, when retrenched or incapacitated policyholders had their debt repayments covered during their most vulnerable months.

Credit insurance typically covers your minimum monthly repayments in the event of retrenchment, disability, or death. If you have it, understand exactly what it covers and what the claim process is. If you don't have it and you are carrying significant debt, it is worth getting a quote  particularly given the uncertainty ahead.

Unfortunately we have no control over what is happening globally right now, but each one of us has control in terms of how you can plan your finances and protect yourself to the best of your abilities.

The best thing you can do right now is not panic, but act deliberately with a clear plan.

Build your buffer. Reduce expensive debt. Protect your investments. And know your cover.  That’s the best you can do.

Wishing each and every one of you well for all that lies ahead ❤️✨

This article is for general financial education purposes. Please consult a certified financial planner for advice specific to your personal circumstances.