South African households have suffered financial pain and economic upheaval for the past two-and-a-half years. 

The net results of the strict COVID-19 lockdowns were a sharp decline in economic output in 2020 and a dramatic market fall followed by an unusually swift recovery. 

According to investment advisors Brenthurst Wealth Pretoria, rising inflation and the Russian-Ukraine conflict have worsened the situation.

In their recent investment report, Charize Beukes, Financial Advisor at Brenthurst Wealth Pretoria, shares five crucial measures to protect one’s finances against future shocks.

1: Emergency fund is crucial

The importance of having savings in an emergency fund was brought home with dramatic effect by the lockdowns. It is suggested to consider your emergency fund as a form of insurance for your long-term investments so that you will not have to sell investments to cover the monthly bills.

2: Set aside saving to counter market upheaval

According to Beukes, it can take up to 10 years for markets to recover to previous bull market levels after a bear market. The danger for retired investors is that drawing from your investment funds during a market downturn could result in significant and permanent value destruction. Focus on performance and rebalance risk to align with your life stage and financial goals.

3: Don’t let debt drag you down 

Many South Africans who live payday-to-payday were hardest hit during the pandemic. With interest rates rising to pre-pandemic levels as the reserve bank fights rising inflation, indebted families are now being crushed under crippling interest rates and mountains of debt, stated Beukes. Reduce debt and scale back on household expenses to set free from debt.

4: Time in the markets beats timing the market

Research shows that investors who remain invested in a well-diversified portfolio for the long term typically do better than those who try to profit from turning points in the market. Had you panicked and sold when markets dropped, there is every chance of missing recovering some of your losses the following day.

5: Don’t wait for a crisis before planning your finances

The blowout from the Covid-19 pandemic caught many investors off guard. However, investors who had a pre-Covid financial plan were more confident in their strategy and had faith in the financial decisions they had made, Beukes concluded.

(Editing by Seban Scaria )