How to weather the storm
Maya FisherFrench provides practical ways to survive an economic tsunami
For the past two years consumers were warned that there were tough times ahead, while day-to-day living became more and more expensive.
Increases in electricity, rates, water and now taxes and interest rates have brought pressure on households, especially those with high debt levels. According to the National Credit Regulator, one in every second creditactive consumer is falling behind in debt repayments.
We have seen this financial stress in research like that of the Old Mutual Savings and Investment Monitor. It found that the percentage of household income spent on living expenses had increased from 57% in 2011 to 68% in 2015. The research also found that 41% of those surveyed were saving less this year than last year. This is the highest figure since the survey began in 2009.
On top of already deteriorating household finances, the shock announcement this week that our economy was contracting has significantly worsened the situation.
Not only are middle class South Africans having to contend with higher prices but income prospects are also under threat. If the economy continues to struggle, companies will be forced to consider retrenchment and, certainly, there will be no above-inflation wage increases.
Households are reaching a critical point in financial survival and face no alternative but to take steps to shore up their finances.
Here are seven ways to make it through the economic storm: It is time to get real about your money. No one can afford to keep their head in the sand. Write up your budgets, analyse your debts and have a family conference. Households that make the tough decision now will make it through the storm later.
12Forget about buying a new car every three or five years. Once you have paid off your car, continue driving it for at least the next five years. The money you would have used for car repayments will settle other debt, and you can put some aside for when you really must replace the car.
3Don’t just swipe your card – think about every single purchase you make. Money is now a very limited resource and needs to be allocated efficiently. If you need to go on a strict budget, consider drawing cash at the beginning of each week for your expenses, place it in itemised envelopes such as “transport”, “groceries” and “entertainment”. Use only this cash and leave the card at home.
4If your debts are starting to engulf you, get help sooner rather than later. The longer you deny your situation, the worse it will get. It will certainly not go away. It is far more difficult to negotiate with your creditors once legal action has started. Consider debt mediation provided by the National Debt Mediation Association, or speak to a credible debt-counselling service.
5Don’t resign to access your pension. If you are faced with overwhelming debt, there will be the temptation to quit your job and access your pension. In this economic climate, it is unlikely you will find another job – and you could end up worse off than you are now.
6 7Be prepared to work harder and longer at work. If your company is forced to retrench staff, you will want to make sure you are an invaluable asset. Start upskilling. While unemployment levels could rise, the more skilled you are, the more likely you are to find work. Find out if your current employer offers skills training, or start a night course.