Many South African consumers may find themselves in the middle of a financial storm following an increase in the cost of petrol, a rise in interest rates and spiralling food costs.
However, all is not lost, as consumers can take steps to gain control of their finances and make better money management choices.
Here are 3 tips to help you stay afloat:
Don’t drown in debt
Janine Horn, financial adviser from Momentum said that credit cards, clothing accounts and small loans can all contribute to a growing pile of debt.
“The best thing for anyone is to avoid the trappings of debt and that starts with understanding financial goals,” Horn said.
Financial success can be achieved on two levels:
- The journey towards a financial goal, and
- The destination when the specific goal is reached
All households and individuals need to have long-term and short-term financial goals for financial success.
Examples of long-term goals include saving for retirement or becoming financially independent, while short-term goals could be saving for a down-payment on a car or a family vacation.
Save yourself by saving your money
Momentum/Unisa research has indicated that many South Africans simply don’t have access to emergency savings.
Consumers have had to stop putting aside for money for savings to cover expenditure and service their existing debts; however, Horn says saving is a key component of a sound financial plan.
It is important that people have an emergency fund or savings for a rainy day to avoid the pitfalls of life.
People need to take a look at their finances and assess where they can free up some money to keep away in an emergency fund.
“You need to start figuring out how much emergency money you should have based on your lifestyle and expenses,” Horn said.
Draw up a budget plan
When there are increases in the cost of living and interest rates it is important that you get back to the basics like drawing up a budget.
According to Sebastian Alexanderson, founder and debt counsellor at National Debt Advisors (NDA), drwaing up a budget allows people to know exactly where their money goes, leave enough money for unexpected expenses, and make small adjustments to start saving.
The first step to drawing up a budget is to work out the net income (after tax) of everyone that contributes financially to your household, whether it is a spouse, children or parents.
Then separate the expenses in your budget into two categories:
– fixed costs - expenses such as rent/bond, levies, school fees, car payments, insurance and bank fees.
– discretionary costs - entertainment, fuel, clothing, data. toiletries and transport.
Also, create column for any savings that you are putting aside towards a savings goal.
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