Why flying too low can crash your finances

At the second test of Rugby’s Greatest Rivalry between the Sprinboks and the All Blacks, Airlink performed a flyover above Cape Town Stadium. An Embraer aircraft swept over the stadium with only about 14 metres of clearance between its wingtip and the roof.

It looked reckless.

It wasn't.

Behind that manoeuvre were highly trained pilots, extensive simulator training, weather assessments, safety procedures, and contingency plans. Every possible risk had been considered long before the aircraft left the ground.

Many people run their finances as though they are flying 14 metres above the ground, but without any of the preparation that makes it safe.

Living pay cheque to pay cheque

Most of us have experienced it at some point.

There is a small amount left in your bank account a few days before payday, but your debit orders have gone off, your bills are paid, and your salary is due soon. It feels as though everything is under control.

But getting through the month is not the same as being financially secure.

Pilots value altitude because it gives them time. If something unexpected happens, they have space to assess the situation and make decisions. Closer to the ground, options become limited very quickly.

The same principle applies to money.

Financial emergencies are not a matter of if but when. The question is whether you have enough breathing room to deal with them when they arrive.

When life happens

Unexpected expenses have a habit of appearing when you least need them.

Perhaps interest rates rise and your bond repayment increases unexpectedly.

Maybe a pothole damages a tyre or rim on your car, leaving you with an immediate repair bill.

Or a medical expense isn't covered by your medical scheme and you suddenly need to fund the shortfall yourself.

These situations are part of life.

The problem arises when there is no financial buffer available. Many households respond by turning to a credit card, overdraft facility, or personal loan simply to get through the month.

Unfortunately, that creates a second problem.

Interest payments reduce future cash flow, making it even harder to absorb the next unexpected expense. Before long, it becomes a cycle that's difficult to break.

Build the safety net first

One of the most common mistakes I see, particularly among younger investors, is wanting to focus immediately on growth.

People get excited about investment opportunities, cryptocurrency, individual shares, or the latest hot property investment.

There is nothing wrong with pursuing growth, but it should not come at the expense of financial stability.

A solid financial foundation is what allows long-term investments to work properly. Without it, investors may be forced to withdraw money at exactly the wrong time, such as during a market downturn, simply to cover everyday expenses.

That can undo years of progress.

The importance of an emergency fund

Before worrying about investment returns, consider whether you have an adequate emergency fund in place.

For most people, a sensible starting point is to build a reserve equal to at least three months' essential expenses.

That money should be easily accessible and available when it is genuinely needed.

At the same time, it doesn't need to sit idle in a bank account earning very little interest. A money market fund or competitive savings account can provide liquidity while still earning a reasonable return.

Most importantly, an emergency fund should be used only for genuine emergencies.

It is not for holidays, weekend getaways, or impulse purchases. Its purpose is to provide stability when life throws something unexpected your way.

Give yourself room to manoeuvre

The Airlink fly-past was impressive because the pilots knew exactly what they were doing.

Most of us do not have the same level of precision available when it comes to life's financial surprises.

That is why building some financial altitude matters.

Having a cash buffer won't eliminate turbulence, but it gives you time, flexibility, and options when challenges arise.

And in personal finance, having options is often the difference between a temporary setback and a long-term financial problem.