5 ways to manage your money during tough times.

Author: Neil Jankelowitz

Since 2013, South Africa has been feeling the effects of the negative prevailing economic conditions: a steadily unstable rand and increased cost of living prices.

These circumstances have seen South African consumers significantly adapt their household spending to cope with these changes.

For example, local consumer research* shows that shoppers are increasingly buying multipurpose cleaners as opposed to many different cleaners for different uses; refill packs as opposed to original packs; and more frozen vegetables (which last longer) as opposed to just fresh produce.

This research also reveals that consumers are increasingly turning to house brands (i.e. Woolworths, Pick n Pay, Checkers and Spar’s own brands) over manufacturer brands, and even using products differently (like buying fragranced body lotion as opposed to perfume) to try make their rands go further.

These findings support my opinion that there has been a paradigm shift in our behaviour, and how and where we spend our money.

And it is necessary: South Africans are indebted to the tune of R1.6 trillion, according to the National Credit Regulator. With the country now in a recession, this amount could increase.

While there is such a thing as ‘good debt, such as your home loan, many people are crippled by bad debt like store and credit cards, overdrafts and personal loans.

So, how do you manage your finances during these tough times, and if you’re in debt, what can you do to prevent yourself from falling deeper into the debt trap?Here are my 5 top tips:

1. Build a realistic budget. Most people never take the time to sit down and budget properly. Do you know how much it really costs you and your family to live each month? Make a note of all your fixed deductions (debit orders) and use receipts to gauge a monthly average for expenses that change each month. Deduct your final expenses figure from your nett salary to see how much money you really have at the end of the month. Interrogate non-essential spending too see where you can cut back and save more. It’s imperative that you know where your money is going, and if you are using it in the most efficient way possible.

2. Stick to your budget! It’s no good simply going through the exercise of drawing up a budget, and then forgetting all about it. Print it out and stick it on your fridge where you can see it every day. This calls for strict discipline, so consider rewarding yourself with your favourite treat at the end of the month when you get it right. 

3. Save for a rainy day. Saving might seem like an insurmountable task, but it starts with just R1. Every rand you put away is one more rand saved than you had the day before. The thing about saving is that it’s addictive: seeing savings gradually increase is a strong motivator to keep on going. The key is to start.

4. Deal with your debt. If you can, start paying back your debt. Like saving, even a small amount of money each month is better than nothing. If you have an existing debit order, aim to pay in a little bit extra. But whatever you do, don’t spend more on your credit cards; rather find the cash elsewhere or, if you don’t have it, don’t spend the money at all.

5. Make sacrifices that count. While you can’t cut back on essential deductions like your insurance or medical aid contributions, you reduce spending on nice-to-haves. Those extra slabs of chocolate, bottles of wine, jewellery and even holiday that you have been eyeing might just have to wait.

If you need more hands-on assistance with managing your money, why not ask your Octagon financial advisor for advice? We’re happy to sit with you and create a financial plan that meets your needs in the current economic climate.

*BMi Consumer Insights: Qualitative research exploring value seeking behaviour by South African consumers, November 2016