With all the twists, shifts and turns the economy has taken this year, it certainly hasn’t been easy-going for cash-strapped South Africans. Now that we’ve kissed the winter blues goodbye, it’s time to welcome the warmer season with open arms and there’s no better way to do it than with a spring clean… of your finances!
“Take this opportunity to get organised. The more organised you are, the more in control you are. You want to be in control of your finances – not the other way around,” says John Manyike, head of Financial Education at Old Mutual.
While it sounds easy in theory, in practice there are often unexpected curveballs that can throw even the most prudent of budgeters off the straight and narrow.
“Changes in both the economy and your personal life affect your budget, which is why it should be revisited on a regular basis,” says Budget Insurance’s Susan Steward.
In September, petrol prices are expected to rise by 59 cents a litre and diesel by 56 cents a litre. Electricity tariffs are expected to increase by more than 20%. And as August stats indicate, South African consumers remain under tremendous pressure to clear debt.
Preliminary statistics from Stats SA reveal that there have been 48 169 civil summonses issued for debt in June, valued at more than R350 million.
Here are a few guidelines from the experts on how to balance our budgets between September’s petrol hikes and increasing consumer debt and living costs.
1.First things first: get rid of debt
Make sure to pay off the most expensive debt first. “This is the debt that carries the highest interest rate and is costing you the most. For example, if you have a bond at a 10% interest rate and a personal loan at a 20% interest rate, consider paying off the loan first,” says Manyike.
Winter shopping splurges on credit may have accumulated, but if you received an annual increase in July, you may have a little more in your bank account and – as much as it can be tough – use it smartly by paying off outstanding debt, Steward advises, or strategise a smart budget plan to make the necessary payments.
2. Cut costs
This isn’t about scrutinising every cent you spend but rather establishing spending patterns to identify possible areas for saving. A good way to do this is to look at your monthly bank statement and see where most of money is going. You may be surprised at just how much you’re spending in certain areas and how by making small changes you could keep your spending in check.
3. Less is more
Examine your monthly budget and if your expenses exceed your income, cut out things you can do without. Just like cleaning out your closet or selling old equipment that is taking up unnecessary space, try to eliminate all expenses and purchases that are not essential. Be very clear on the difference between needs and wants.
4. Remember your saving goals
If you didn’t stick to your New Year’s resolution to save more money this year, it’s not too late to start now. Make a plan to set up a monthly debit order to an investment account or open a tax-free savings account, increase your pension fund contribution and request the 13th cheque option from your employer, if available to you.
5. Save for the unexpected
The amount you save towards an emergency fund depends on your personal circumstances. Ideally an emergency fund should cover three to six months’ living expenses, says Steward, adding that while this might seem like an insurmountable amount to save, just by putting aside R250 a week, for example, you have yourself R1 000 at the end of each month.
“If you don’t have savings, you aren’t getting ready for the day when you must pay out more money than you have. This day can come in the form of an unexpected medical bill, or family emergency, and it is at times like these that your savings can save you,” Manyike points out.
6. Track your spending
Try establish where unnecessary spending goes and how you can reduce it by making small changes to save big. Keep track of expenses in your statements and find a pattern to re-strategise saving methods.
7. Outdated fees must be phased out
You could be paying subscription fees for magazines you don’t read, a gym you don’t go to or paying for a bank account you no longer use. End subscriptions and use the money in more efficient places.
8. Payments that don’t reap rewards
Always read the fine print or terms and conditions when it comes to gaining loyalty points from reward programmes. Falling for a quick programme can have you overspending for smaller returns. Sometimes it’s just not worth it.
9. Know the money lingo
Research, read and seek advice on the best methods to save your money and make it go further for longer. Understanding investments, pension funds and the best account to save and spend your rand can certainly take you a long way.