“Even if you do have some savings, how long will those savings last you, given your monthly essential cost of living?” ….. “That’s a really valuable number even if you do have a job right now, because the fact is, your job is not guaranteed in two weeks or tomorrow.”[i] – Forbes article
And that is the name of the game. Budgets and planning are not only for companies but more importantly, for you. So let’s get some basics right, as its end of month, and there are so many uncertainties for the moment, on your future and employment, or returns if you are an entrepreneur. We are not financial experts, so do get your own advice if you have access to this.
Some businesses will make a living whilst others may close. We are just providing a simple but hardcore truth formula ‘a notre sauce’.
1. Give me a simple plan to organise myself and my money
You have two choices. You can plan in advance or you can hope for a miracle to feed your kids and yourself. You may be one of the lucky ones to have plenty of money and security or you can be worried like most people for their health, dear ones, and how to make ends meet in future.
If you are pragmatic enough to agree to plan in advance, let’s start with us proposing you something:
- Make a 13-weeks, week by week plan. The Money you have now should make you hold for 13 weeks at the least. If not, that is what you need to tackle first. Of course, the longer you can make this, the better.
- Divide your expenses into segments:
– Survival – ONLY FOOD
– Basics – Electricity, water, internet, phone and roof (Rent)
– Basic wants – child schooling and first car, insurances (if they work for COVID) …
– Medium wants – Investments, insurances (if they do not work for COVID) …
– High Wants – Anything else including second and other vehicles …
You can change the priorities to fit your own profile. Spread it out over 13 weeks to know what payments are coming up and when.
- If you cannot meet your 13 weeks expenditure for your present lifestyle with the money you have WITHOUT CONSIDERING THAT YOU WILL GET ANOTHER MONTHLY SALARY IN THAT TIME – start cutting, and start cutting from the High Wants down.
Your sole purpose this year is to be tactical enough to keep extending the 13 weeks period to longer terms.
I do not see any reason why a company should not think the same way.
2. I am renting a house. What can I do but pay my rent?
Whatever happens in future, one thing is sure. Everyone will want to reconsider their situation in life, negotiate for changes and appreciate the value of things through a different lens.
So let’s take this 4 questions approach:
Step 1 – Do I believe that the house I am renting, actually fills my needs in this changed world. Do I want this type of house going forward, specially where security may be more of a concern for example?
Step 2 – Do I want to keep the house if I can afford it, if so, do I still negotiate for a reduction in rent?
Step 3 – Do I have better value in spending this money somewhere else – so let me start looking for rental places online to move as soon as possible or within a planned time and plan how to stop the present rental agreement?
Step 4 – Do I really need to rent alone or can I share a roof with friends or family?
3. Do I have loans which I cannot repay either secured on my house or other assets I have bought?
The Mauritian dream! Having your own house and little garden. This is the best trap we have been trained to view as an investment, rather than a 20 to 30 year liability. An investment is when you make money out of having invested in something. Your house will be an eternal liability if you own one, with no income coming out of it, but expenses every month to make this happen. The dream…!
But it’s never too late. You have a few options.
Option 1 – Saving the EGO / Short term planning
Go to your bank and renegotiate your loan. Banks are fully collaborating with Government these days in providing lower interest loans and restructuring opportunities. But remember, you will still remain indebted and not making any progress in life, unless you consider owning your own home in 30 years as progress… You will not have learnt much from COVID and the values of life that really count (This is my view of course).
Option 2 – The Entrepreneur option / Medium term planning
Selling a house in this market environment is probably crazy. No, sale prices may not go down, since most banks will be helping people restructure, but someone needs to be very special indeed to buy at such high prices these days. We do consider that rental values will go down, and therefore this creates opportunity for you to rent at cheaper and rent out your dream house for a higher monthly rental to so that you can make it work for you for once…
Option 3 – Damage control
OK. So you cannot meet the 13 weeks planning with your loan repayment. The bank is not ready to help. You will need to decide on how much time you have before all these hit you and your house is repossessed. Within that time, plan your options, and how best to make them happen:
– Where else can you get a loan or financial help from?
– Can you start an activity where income can be generated in your house itself?
– Can you find a buyer where you do not lose everything?
4. What will people think, my new German car!
If you have a company car for the moment, do consider how you can plan to get a car if something goes wrong. If you are paying for your own car and have a lease, you may have simple and straightforward cues:
- Renegotiate the leasing agreement
- Sell and downscale
- Sell and rent
- Share expense and ownership with friends or others (funny one but why not)
The car is a difficult one, because owning one can also help you live a post lockdown life.
However, you do not need a Porsche for that unless you have already paid for it, or can afford the Trump’s security.
We will all need to learn how to live and work in an environment, where, we should assume that everyone we meet is infected. Public transport will probably adapt as well.
This is a year to be practical, and tactical. If you had a 12 months plan, scrap it and start anew.
Make sure that there is no ego in the plan, and everything is done with heart and will a lot of communication between yourself, your investors (your family who believe in you) and everyone whom you will need to interact with to make the above possible.
Sanjeev Ghurburrun
Director - Geroudis Limited
Sanjeev is a barrister of more than 25 years experience. He is an INSOL fellow. He has advised a wide portfolio of international clients, including FORBES 100 Corporations in his areas of expertise.
