South Africans have faced mounting financial pressures in 2023, and Debt Rescue has outlined eight ways South Africans can master their finances in the new year.
South Africans are expecting increased prices in 2024 despite a recent decline in headline inflation in the country.
As per the Bureau for Economic Research’s (BER’s) latest Inflation Expectations Survey for Q4 2023, respondents believed that inflation in 2023 will stand at 6.1%.
But they now also expect inflation to take longer to ease over the long term, reaching 5.7% in 2024 and 5.6% in 2025 (up from previous forecasts of 5.5% and 5.3%, respectively).
“This upward revision was driven by business people and trade unionists increasing their forecasts; analysts held their forecast virtually unchanged over the forecast horizon,” the BER said.
Credit experts such as Eighty20 and Transunion have also noted South Africans are under massive financial pressures after a turbulent 2023, with a sharp increase in households defaulting on home loans, vehicle finances and credit card debt.
Considering these bleak statistics, Debt Rescue noted it is important to alter your money habits into positive wealth-building strategies and provided eight tips, as outlined below.
1. Pay yourself first
This means setting aside a portion of your income for savings before you spend it on anything else.
Ideally, it would help if you aimed to save at least 10% of your earnings before tax. This will help you build a strong financial foundation and prepare for unexpected expenses or emergencies.
To make this habit easier, you can automate the process by setting up a direct debit that transfers a certain amount of money from your income to a separate savings account every month. This way, you won’t be tempted to spend the money or forget to save it.
2. Track your spending
To track your spending, you can use a spreadsheet, an app, or a simple notebook. The important thing is to record every expense, whether small or big.
Differentiate between needs and wants by analysing your spending habits. Needs are essential expenses like rent, food, utilities and transport, while wants are discretionary expenses like entertainment, eating out and shopping.
Prioritise your needs and save a predetermined amount before spending money on your wants. Avoid overspending on your wants and compromising your savings.
3. Review your medical aid, insurance, and bank charges
You may be able to save thousands of rands a year by reviewing your medical aid, insurance and bank charges annually and either negotiating better rates or shopping around for better offers. These are often hidden costs that can consume much of your income without you noticing.
Some of the things you should look out for are:
- Medical aid: Compare different plans and benefits and choose the one that suits your needs and budget. You may be able to switch to a cheaper plan or get discounts on healthy habits.
- Home building insurance: Update and re-examine your household inventory to avoid over-insuring your possessions. You may also be able to lower your premiums by installing security features or increasing your excess.
- Car insurance: Shop around for the best deal and consider factors such as the market value of your car, the type of cover, the excess, and the benefits. You may be able to reduce your premiums by driving less, parking in a secure place or taking a defensive driving course.
- Bank fees: Check what fees you’re paying for your accounts, cards and transactions and see if there are cheaper alternatives or ways to avoid them. For example, you can use online banking instead of branch visits, use your own bank’s ATMs instead of other banks’ or sign up for automatic bill payments to avoid late fees.
4. Reduce your phone costs
Your phone bill may be another source of unnecessary spending that you can easily cut down on. To do this, you must monitor how much time you spend on your phone and how much data you use. Then, you need to compare different packages and plans and choose the one that matches your usage and budget.
5. Watch your car expenses
Your car may be one of your biggest expenses, especially if you have a loan or lease. To save money on your car expenses, you need to maintain it regularly and drive it efficiently. Some of the things you can do are:
- Service your car according to the manufacturer’s schedule;
- Check your tire pressure and alignment regularly;
- Use the correct grade of fuel and oil for your car;
- Avoid speeding, braking hard and accelerating rapidly;
- Plan your trips and avoid unnecessary driving; and
- Carpool, use public transport or cycle when possible.
6. Live below your means
Living below your means is a simple but powerful principle that can help you master your finances. It means spending less than you earn and saving the difference. By living below your means, you can avoid debt, build wealth, and achieve financial freedom.
7. Stay out of debt
Debt is one of the biggest enemies of financial freedom. It can drain your income, damage your credit score, and limit your choices. To master your finances, you must stay out of debt as much as possible. If you already have debt, you need to pay it off as soon as possible.
Try to:
- Avoid using credit cards or loans for things you don’t need or can’t afford
- Pay your bills on time and in full
- Use the debt snowball or avalanche method to pay off your debts faster
- Seek professional help from a qualified debt counsellor if you’re struggling
8. Create a rainy-day fund
A rainy-day fund is a separate savings account that you use for emergencies or unexpected expenses. It can help you avoid using credit or dipping into your long-term savings when something goes wrong. It can also give you peace of mind and security.
To create a rainy-day fund, you need to:
- Decide how much money you need to cover three to six months of living expenses;
- Set up a separate savings account that is easy to access but hard to touch;
- Save a small amount every month until you reach your goal; and
- Use the money only for emergencies or unforeseen events.
