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How to stay insured when money is tight

How to stay insured when money is tight
08-02-23 / Tau kaVodloza

How to stay insured when money is tight

Johannesburg - Interest rates are up again, which means we’re paying even more on our bond and car payments. The price of food and fuel keeps rising. It’s tough to make that budget sing at the end of every month. Maybe we can just cut back on insurance until things get better. After all, a couple of months can’t hurt, right?

Stop right there, says Stian de Witt, Executive Head at employee benefits firm NMG Benefits. Cancelling your insurance cover may seem like a good short-term solution, but it’s one of the worst financial moves you can make. It can easily result in long-term financial strain because of a death or disability.

“Disability cover and life insurance is critical to ensuring your financial wellbeing. You can plan for your retirement and for your kids’ education. You don’t plan on becoming disabled, being unable to work or pass away. If you have to change something, change your investments, but never your insurance,” says De Witt.

But how do you keep insurance in the budget when you’re struggling to make ends meet? De Witt has a few tips.

Manage your budget

“I always say there’s a difference between having a budget and keeping to a budget. How you manage your budget is really important. You need to get super-disciplined,” says De Witt. This means budgeting for unexpected expenses, and scrupulously recording and tracking every expense – even if it means carrying a notebook around with you.

Make sure you’re not over-insured

If you already have a pension or provident fund at work, be sure to take those benefits into account. It’s no use being over-insured on disability, because it will never pay out more than 75% of your income anyway. And be sure your disability cover includes a lump sum to cover debts like bond and car payments.

Use the envelope approach

When you go out, keep your credit card in your safe at home. Allocate an amount of money for every category in your budget to an envelope, whether physical or virtual, and stick carefully to the amount you have in the ‘envelope’. That way, you can’t overspend on things you don’t necessarily need.

Earn some extra money

Go through your house and gather all the stuff that you don’t use or don’t need, and sell it. Then use that money to pay off debt. “Paying off debt is effectively giving yourself a raise, because you have to spend less on servicing that debt,” says De Witt. And if you can, get a side hustle to earn some extra income, go for it!

Talk to a financial adviser

Your life and insurance should cover three things: paying off all debt if you die; making sure your financial dependents are taken care of when you can’t; and estate liquidity to cover taxes and executors fees. “Make sure people aren’t trying to sell you something you don’t need. If you have no debts or no dependents, you only need disability and dread disease cover. Get the right advice,” says De Witt.

“Insurance is a critical safety net in times of trouble. It gives you and your family peace of mind, knowing that your financial future is secure when calamity strikes,” says De Witt.

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