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There is no doubt that 2016 will take its toll on households financially as price increases across the board push up our day-to-day living expenses. It is time to take a cold, hard look at household finances and to make some adjustments.
1. BUDGET, BUDGET, BUDGET
Write down everything you are spending money on. I promise, you will be surprised at the unconscious spending that is really happening and the areas in which you can save several hundreds, if not thousands, of rands a month.
2. STRESS-TEST YOUR BUDGET
This week, petrol went up by 88c a litre – on a 50-litre tank, that will cost you an extra R44 to fill up. But to put it in perspective, the petrol price is still nearly R2 less than the peak petrol price in April 2014.
The recovery in the rand in the past few weeks protected us from a further 10c-a-litre increase, but any further weakness means we need to prepare for future price hikes, along with at least 10% increases in food and electricity costs.
Once you have a proper budget written up, add 10% to all your essential bills, such as groceries, electricity and petrol, and see if you can absorb these costs and what you need to be cutting back on now to survive the year.
3. BULLETPROOF YOUR MORTGAGE
Since July 2014, our mortgage repayments have increased by 150 basis points, which translates to an increase in repayments of about 15%.
Economists are predicting an increase of between 50 and 100 basis points by the end of 2016.
The rate hikes are coming, so you may as well adjust your budget now by increasing the repayments on your prime-linked debt (usually mortgage and car finance) immediately.
Those extra payments will help reduce your debt and prepare you for those higher payments.
4. GO ON A SPENDING DIET
Make a commitment to stop all impulse spending or purchasing of nonessential items for at least the next three months.
The best way to achieve this is to leave all credit cards and store cards locked away at home when you go shopping.
It also helps to remember that when you buy items “on sale”, you are not saving money; you are spending, so don’t be tempted.
Also, do not give in to the temptation to increase your credit limits – start by cutting back on your spending.
5. WORK THOSE LOYALTY POINTS
Between the loyalty rewards offered by banks, insurers and retail stores, most consumers have some form of loyalty programme.
It is worth spending the time finding out what benefits you can use to get through the rest of the month. Fuel rewards are especially useful as the fuel price rises.
6. REVIEW THOSE MONTHLY BILLS
When was the last time you reviewed your short-term insurance policies or bank fees?
It is a competitive environment out there and, given the cost of client acquisition, many insurance companies are prepared to lower their annual increase should you ask.
Bank fees, gym fees and subscriptions should all be reviewed as part of a budget-tightening exercise.
