Nicolette Dirk, finance writer, Justmoney.co.za
Ignoring the ever rising costs of fuel-price hike, interest rates and the general increasing living costs can carry long-term risks for breadwinners and their families.
This is according to Anele Mbuya, senior marketing actuary at Old Mutual, who said that understanding spending patterns is particularly appropriate during Human Rights Month.
“Financial security and human rights are intertwined, as evident in South Africa’s triple challenges of poverty, inequality and unemployment.
Being entitled to the rights guaranteed under our country’s Constitution can ring very hollow if you and your family are shackled by financial woes or worse, locked into a cycle of generational poverty,” said Mbuya.
He added that one major risk is that large short-term debts can obstruct long-term priorities like planning for your retirement or saving for your children’s education.
Dean Randall, debt negotiating manager at DebtBusters, said that short-term debt becomes a problem when people are not aware of the interest rate of the debt incurred.
Increase your earning power
When your living costs outpace your earnings, you should firstly know just how much you earn and spend each month. According to Randall, increasing your income or cutting down on expenses are the only ways to remedy financial problems.
“You can either work more hours or get an extra job. The problem is a lot of people are supplementing their income by making more debt. You should also reduce expenses buy shopping at a cheaper stores and getting rid of luxury expenses like DStv,” said Randall.
Mbuya added that it’s worth cutting back on nice-to-haves just so you can rid yourself of the debts on your credit cards and store cards.
“Many people realise that they indulge in luxuries out of habit and that they can adjust to living without them quite quickly. It takes courage to examine your costs and cut those you can.
But it’s worth cutting back and saving a few thousand rand each month on car instalments and petrol, so you can invest that money in your child’s university education instead,” he said.
Make saving a priority
You need to insulate yourself from the rising cost of living and one way is through saving. Interest rates could be going up again and this means the interest on your investment will increase as well.
“Build your financial behaviour around saving. Save first and spend what’s left, rather than spending first and saving what’s left,” said Mbuya.