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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. Making that budget work at the end of every month is tough.
So you might consider cutting back on insurance until things get better.
Not so fast. "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," says Stian de Witt, executive head at employee benefits firm NMG Benefits.
Disability cover and life insurance are critical to ensuring your financial well-being. You can plan for your retirement and your kids’ education. You don't plan on becoming disabled, being unable to work or passing away. If you have to change something, change your investments, but never your insurance,” says De Witt.
According to De Witt, disability cover and life insurance are critical to ensuring financial well-being. And while you can plan for your retirement and your kids' education, you don't plan on becoming disabled, being unable to work or passing away.
"If you have to change something, change your investments, but never your insurance," says De Witt.
De Witt shares a few tips on how to keep insurance in your budget when times are tough:
Manage your budget
How you manage your budget is important. "It would help if you got 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. 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 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, gather all the stuff you don't use or don't need, and sell it. Then use that money to pay off debt. "Paying off debt effectively gives 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.
Talk to a financial advisor
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 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.
Questions may be edited for brevity and clarity.
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