Consumers must tighten belts as cost of living soars
INCREASED living costs have highlighted the need for consumers to spend frugally and ensure they have effective financial planning strategies in place, according to Henry van Deventer, financial planning coach at acsis.
A hike in the petrol price, which over the past two months has increased just short of one rand, the implementation of e-tolling, an electricity tariff increase of 16% and higher Metrorail fares mean consumers can expect to be hit hard in the coming months, Van Deventer said.
The increase in transport and electricity costs and the consequent knockon effect this will have on the price of most goods and services are especially worrying in light of South Africa’s low savings rate, he said.
“South Africa already has an extremely low savings rate, with savings that constitute only 20% of the country’s GDP. When compared to other emerging economies such as China and Malaysia, South Africa scores extremely low on domestic savings levels.
“In addition, it is estimated a frightening 94% of working South Africans do not save enough for retirement and therefore will face financial difficulties in their golden years.”
Van Deventer said that on top of the day-to-day savings, working consumers should be saving about 15% of their salaries towards retirement, but “this is becoming increasingly difficult to do with the high cost of living”.
Consumers would need to ensure they have set budgets in place and they stuck to a financial plan when it came to saving strategies, he said.
“Effective planning will ensure that consumers can retire comfortably and afford necessities.
“An effective budgeting method is to analyse monthly variable expenses such as petrol, clothing, groceries and cash withdrawals, as these items make the difference to wealth building strategies.
“These expenses need to be separated into need-driven and want-driven costs. By cutting down radically on want-driven expenses consumers can effectively find additional funds for savings purposes.” – I-net Bridge