Easy steps to a brighter future
While the South African economy has largely recovered from the tough global downturn, many consumers and homeowners are still struggling with the rising cost of living, says Adrian Goslett, CEO of RE/MAX of Southern Africa.
He says that the recent budget speech was encouraging in that the increased job creation will support further economic recovery and lead to sustainable growth in the future, however the more that homeowners are able to manage their levels of debt and develop a strong culture of saving, the better off for the economy and the homeowners themselves.
It has become so important to the government that consumers develop a culture of saving, that a tax incentive to encourage savings is under consideration. This includes tax exemption on certain short and medium term savings of up to R30 000 per year and R500 000 in a lifetime.
So how do consumers save money with living costs on the rise? Goslett gives a few small steps towards cutting costs, reducing debt and maintaining a budget that allows homeowners to save money:
Paying less money for unnecessary items is the first step to saving money. Sit down with the members of the family living within the household and make a list of each member’s expenses. Work together to see which expenses are absolutely necessary and which ones can be reduced or cut out completely. For example, encourage everyone in the family to unplug appliances when they are not in use, pack lunches for work or school instead of eating out and reduce internet or television packages to the essentials. If two cars are being used in the household, if possible, consider reducing travelling costs by taking one car.
Once expenses are identified, divide them into two categories, those that are priority and core expenses and those that are not. Set money aside each month for the expenses that are nonflexible, such as bond repayments or rent, levies, utilities, insurance. Other expenses such as entertainment, food and petrol are the expenses that can be reduced to accommodate for more savings.
Keep a record of all money spent. Write down every amount spent in a journal or notepad that can be carried around and then translate all lists kept by family members into one household spreadsheet. This will help you to formulate a visual aid as to where the money is going and how and where to reduce areas of unnecessary spending.
Have a day of the week that is set aside for a cash withdrawal and keep it to only once a week. Withdraw enough money to cover all weekly expenses, taking into consideration aspects such as spending money. If the money runs out, do not make another trip to the ATM until the following week. Check balances online to manage the account effectively.
Where possible do not rack up further credit card debt, either use cash or a debit card. If there is no money in the account or no cash available, do not buy the item unless it is absolutely essential. Credit cards incur interest and will often lead consumers to spending outside of their set monthly budget.
“Cutting costs and adhering to a budget will give homeowners the excess funds they need to put towards savings and create a foundation on which financial freedom is built. Having a nest egg to fall back on in tough economic times will help homeowners to weather any future financial crisis and protect their most valuable asset, their home,” Goslett concludes.