BOITUMELO NTSOKO: Welcome to the Money Savvy Podcast, I’m Boitumelo Ntsoko. If you’ve been keeping an eye on your budget, you will have noticed that the price of just about everything has increased. And with salaries mostly remaining stagnant as companies recover from the impact of the pandemic, South Africans are finding it more difficult to cope with the rising cost of living.
If you’re looking for ideas on how to save on your monthly expenses, then stay tuned. Tanya Joubert, who is a certified financial planner at PSG Wealth Pretoria East, joins me on this episode to share some tips on how to get more bang for your buck.
TANYA JOUBERT: Thank you so much, Tumi.
BOITUMELO NTSOKO: Tanya, the increasing cost of groceries is a concern for most of us. According to the Pietermaritzburg Economic Justice and Dignity Group, the food price basket in March increased to about R4 450, while the Competition Commission’s latest Essential Food Pricing Monitoring report shows items such as tomatoes, chicken portions, and cooking oil saw volatile price increases over the last two years. What can we do to save on our monthly food bill?
TANYA JOUBERT: Yeah, thanks for the question, Tumi. Food inflation is indeed a huge challenge for most of us. And unfortunately, the supply uncertainty caused by the current war in Ukraine is definitely expected to add to these concerns. But consumers need to just be smart with their money, and simply taking some time to properly plan your purchases can really go a long way in stretching that paycheque. Make a list before you shop and stick to the list. You know, that’s one of the basic aspects of, of saving, you know, just it comes down to the planning aspect of it.
And I know it sounds silly, but it does make a difference, but avoiding shopping when you’re hungry makes a huge difference.
And I find also taking a calculator along when you go do your shopping just to help you keep track of the cost that really helps as well. And compare different brands. You know, we often tend to be unnecessarily brand loyal when it comes to our groceries. But you might save money by trying out some of the house brands that are available. I also personally find that planning your weekly meals or menus based on items that are on sale or items that are in season helps.
And cook smart, you know, minimise wastage, make stock from the leftover vegetables and bones when you have a roast chicken; these kinds of things definitely make you stretch that paycheque. Try to simplify your meals by adding fewer ingredients than usual … or you can be creative with recipes and make them your own based on what you have in your pantry or your fridge. And then use your loyalty cards. You know, most stores offer loyalty cards where you can benefit from significant savings. The small savings here and there really do add up at the end of the day.
BOITUMELO NTSOKO: Is it better to weekly shop or monthly shop?
TANYA JOUBERT: I don’t really think that there’s better or not. I do think that from a planning point of view, maybe on a monthly basis, it might help you. But often weekly, weekly purchases might be necessary, you know, some of the sales do actually they get advertised on a weekly basis. So, I mean there is merit in shopping weekly. Also, to have fresh food in your fridge, you’re gonna have to ultimately go to the shops weekly in any case. So sometimes it would make sense to do it weekly. But perhaps some of the items that would allow you to buy bulk that might make sense to actually buy those in bulk monthly. And by doing that you might actually also save a bit. And so there are arguments for both, but ja, maybe a combination of the two will definitely help. I mean fresh fruit definitely weekly, but bulk buying monthly.
BOITUMELO NTSOKO: At the beginning of the year, some of us saw our medical aid premiums going up, except for Discovery Health, which deferred its premium increase to October. But medical aid premiums are only part of our medical costs. There are also medicines and maybe medical equipment that some may have to consider. Are there ways we can reduce our monthly medical expenses?
TANYA JOUBERT: Yeah, you know, in South Africa, we are blessed with fantastic hospitals and doctors, but you rightfully say it’s expensive and it definitely makes up a big chunk of our budgets. Firstly, I don’t think we ask enough questions. I mean, ask your pharmacist and doctor about possibly rather using [generic] versions of your medicine. We also often forget that medical products and services – just like any other product and service out there – allow you to shop around and compare costs.
I mean, you can ask for cost estimates prior to a procedure to allow you to plan, compare and prepare accordingly.
If you’re lucky enough to be a member of a medical scheme, make sure that the particular plan that you’re on is appropriate given your particular medical needs and that of your family. So often a hospital plan, for example, in conjunction with Gap cover, is more than sufficient to meet your needs. You don’t always have to have a comprehensive plan. There are many professionals out there who specialise in medical aid, so maybe chat with them to just help you determine what the right plan is for your personal needs.
If you have medical aid and there is a preferred network that they insist on, try to stick to it, that’ll avoid any additional costs. And understand your medical aid. You know, often even hospital plans will allow for routine checks and scans to be covered perhaps once a year or once every second year or so on, so understand the medical plan that you’re on. And then, of course, some of these plans, it goes hand in hand with some benefits, some reward benefits. Make sure that you’re actually utilising the benefits that you’re paying for. Often there is a separate cost involved to these benefits so make sure you use it. And if you don’t use it, and you don’t benefit from it, perhaps it is time to consider just cancelling it.
BOITUMELO NTSOKO: Now we know insurance is a grudge purchase for a lot of people. But as we’ve seen with the recent KZN floods, it can be a lifesaver when the unexpected happens. So what can we do to take some of the pain out of paying for both long-term and short-term insurance?
TANYA JOUBERT: From a long-term point of view, ensure you aren’t overinsured. Many financial advisors will be able to help you determine this. But your insurance needs change as you move through different phases of your life and this needs to be monitored. Furthermore, often people forget or aren’t even aware of certain group benefits that they might have, you know, with your pension scheme through your employer. Remember to take this into account. Long term insurance can also be quite technical with all sorts of bells and whistles that need to be aligned with your needs. For example, make sure the premium payment pattern is appropriate for your needs and your budget. And also, maybe consider accelerated benefits as opposed to standalone benefits. But they are quite technical, so maybe chat to a professional to help you just determine your needs. Then from a short-term point of view, also make sure you aren’t overinsured.
You know, the value of your vehicle, for example, reduces as time goes by. So, make sure you adjust the amounts assured accordingly.
Also, review your policy document regularly or annually and make sure the items covered are still in line with your needs. Also, in terms of short-term insurance shop around – don’t be afraid to negotiate. I found that there’s quite a lot of room for negotiation in the short-term insurance space. But in saying this, stick to reliable and reputable insurance.
BOITUMELO NTSOKO: The Reserve Bank increased interest rates last month for a third time in a row with more rate hikes expected in future. This means credit is obviously getting more expensive. If you have debt, is there a way you can save on it?
TANYA JOUBERT: Indeed, also a very relevant and topical question at the moment. To curb inflation, the South African Reserve Bank has been increasing interest rates and the expectation is for rates to increase even further in the short to medium term. So even though this will benefit investors who hold cash reserves, the debt burden of individuals, as you mentioned, will increase. So, to give you a better idea, for someone with an outstanding bond amount of R1 million over a 20-year term, a 50 basis point increase in interest rates will translate into an approximate R300 a month extra that you would need to have to pay extra on your bond. And unfortunately, 50 basis points is less than the movement expected in the short to medium term. So, this is bad news for all of us bondholders. So there are a few ways to manage the debt and prevent it from running away with you. Avoid expensive debt like credit cards and retail accounts. Also, if you already have it, prioritise it and try to settle it as soon as possible. Don’t use debt to pay any running expenses.
And then when you are applying for debt, make sure you build in a sufficient buffer to accommodate likely future interest rate increases. Will you be able to afford your bond payment as an example, if interest rates were to increase, say with 200 basis points?
Most banks have online banker or bond calculators. So play around with different scenarios and make sure that you can afford the debt that you’re planning on incurring. Avoid balloon payments at all costs, this I cannot emphasise further. You know, this is a problem that many people have, they increase their life standard by incurring debt payments or sorry, balloon payments. So, avoid that as far as possible.
And trying to pay more than the minimum amount required, you know, every little bit helps. And then another way to take control is the old envelope method. I don’t know if you’re familiar with it, but draw physical cash, place it in envelopes, and then use the cash for specific purposes. This is something that I’ve personally done in my life, and it definitely helps. It just puts you in control of your finances. And it’s a lot harder to go over budget and go into credit. So, there’s something psychological about spending your own hard-earned tangible cash. It makes it a lot harder than swiping a card. You end up thinking not twice, but three times, before you end up swiping or before you end up spending the money. And I’ve actually seen it. It’s this concept, it’s called cash stuffing these days. I saw it on TikTok the other day, and it’s it seems to be making a bit of a comeback at the moment.
BOITUMELO NTSOKO: Recent reports show that municipalities are looking at increasing utilities by between 9% and 11% from July. What are some things we can do to better absorb these costs and possibly reduce them?
TANYA JOUBERT: Increasing utilities [costs] is definitely a constant battle that we as South Africans are confronted with. Many people opt to go off the grid completely. However, this [involves] a huge capital outlay; I don’t think many people can afford this. So there are a few small things that we all can do ultimately to make a difference.
I think the best place to start is to turn off the lights and unplug unused appliances. Remember, many appliances even use power when in sleep mode. So, when you go away for a few days, turn off the geyser. Also, when it comes to the geyser, reduce the temperature. Many of our geysers are set to scorching temperatures where you end up basically adding cold water anyway. And it’s become almost fashionable these days to use air fryers. But from an energy-saving point of view, using an air fryer as opposed to traditional ovens really does make a difference. And then opt for showers instead of taking a bath. Studies have shown that taking a five-minute shower uses approximately a third of the water that’s used when taking a bath.
Limit the use of heaters, rather cosy up with a nice blanket and a pair of socks.
And then one thing I think many people are guilty of is [not] turning off the water when you’re shaving or brushing your teeth. And then when you do your laundry, stick a full load and don’t do half loads, and use cold water instead of hot water. So some of these things do sound logical, but I’m quite sure that most of us are quite guilty of many of them.
BOITUMELO NTSOKO: Would getting a rainwater system or investing in a greywater system be an option for some people?
TANYA JOUBERT: I think that’s fantastic. Um, you know, it’s hard because we do have a [water-scarcity situation in SA]. I think many people who went through the drought now, recently, definitely benefitted from it. I personally wished I had it now that we had all the rain that we had to just catch up some of the rain, it would definitely have gone a long way. But yeah, definitely. Definitely one of those things to consider. A little bit of a capital outlay, but in comparison to some of the other options out there, I don’t think it’s that large. So yeah, definitely, definitely something to consider.
BOITUMELO NTSOKO: Petrol has increased to record levels in the past few months. And while government has dipped into partially reduce these costs, it’s a temporary measure and we will likely see more increases. With these increases, obviously public transport will go up as well. So how can we save on our transport expenses?
TANYA JOUBERT: Ja, another very relevant topic at the moment and also currently exacerbated by the conflict between Russia and Ukraine. The most commonly used mode of transport to travel to work in South Africa is by car. This is according to a 2019 study conducted by Stats SA. So where possible use more public transport. This is, however, even though it’s affordable – or more affordable anyway – it does come with its fair share of challenges. Our public transport system in South Africa isn’t always as reliable as we would want it to be. But definitely, where you can, use the public transport system. Another alternative to a car, to normal driving yourself, is carpooling. This does require a bit more planning from a logistical point of view, but ultimately it definitely helps.
And then try to plan your trips better, you know, to increase efficiency. Try to kill more birds with one stone when doing a trip.
And then lastly, I think you know with the worst of Covid hopefully behind us now, I think many employers are slowly but surely starting to return to the office after having worked from home for a significant part of the last two years. Perhaps now’s a good time to negotiate with your employer to continue allowing [you to] work from home even a few days a week, this will definitely lift the burden a bit.
BOITUMELO NTSOKO: Some people are considering downgrading the car in hopes of maybe saving on the fuel costs. But when you consider starting new financing, is that a good idea?
TANYA JOUBERT: It can be. It can definitely reduce the cash flow, can definitely lift your cash flow, a bit. I guess it’s on a case-by-case basis. I think it’s important to not lose value on the transaction in terms of the car. But it can definitely help in terms of your instalment reducing. Often you might actually, if you go for a smaller car, maybe not necessarily the same quality, you might actually not necessarily get the same interest rate that you could have. So it’s important to look at that. But yeah, I do think that there are a lot of people who drive cars that are a bit beyond their means.
So I definitely think there’s room to consider reducing that [expense] or downgrading [your vehicle], because I do think many people live up or try and live up to the Joneses which I think is a bad idea in the current economic climate generally, but especially now.
So yeah, I think if you have been living above your means, definitely it is something to consider. Just also do the math, you know, do the calculations in terms of the new interest rate versus the old one, any initiation costs and all that sort of thing. Yeah, there are definitely merits in doing that from a cash flow point of view.
BOITUMELO NTSOKO: Thank you so much Tanya. That was Tanya Joubert, who is a certified financial planner at PSG Wealth Pretoria East.