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Debt, savings and retirement – the real budget talk we should be having with ourselves

South Africans are ready to face the reality of increased costs across the board. Rising fuel prices, growing inflation, increased interest rates and the inevitable surge in food prices all seek to cripple household finances. File Image: IOL

South Africans are ready to face the reality of increased costs across the board. Rising fuel prices, growing inflation, increased interest rates and the inevitable surge in food prices all seek to cripple household finances. File Image: IOL

Published Apr 27, 2022

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South Africans are ready to face the reality of increased costs across the board. Rising fuel prices, growing inflation, increased interest rates and the inevitable surge in food prices all seek to cripple household finances.

Financial adviser from Momentum, Janine Horn, says personal debt is a real issue too many South Africans and we need to tackle this.

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“The cost of living has put us all under pressure. The ability to save is becoming a luxury that many South Africans simply cannot afford. This time of year makes me feel like we should all be making household budget addresses in our own lives to deal with our own financial woes,” says Horn.

According to the Momentum/Unisa Consumer Financial Vulnerability Index, with high levels of unemployment, economic uncertainty, poverty and debt, South Africans are finding it increasingly difficult to stay afloat and keep up with monthly debt, let alone save for emergencies or even retirement.

As a financial adviser, Horn provides some perspective on these consequences:

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Swim to your goals, don’t drown in debt

“According to my clients, over the years, debt may be the single greatest stressor when it comes to financial planning,” says Horn.

With credit cards, clothing accounts, small loans and even family handouts, coupled with a fragile economy with record high levels of unemployment, the best thing we can do; is avoid the trappings of debt. It starts with understanding your financial goals.

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“Financial success can be achieved on two levels: the journey towards a financial goal and the destination - when the specific goal is reached. In simple terms, for households and individuals to know whether they are financially successful or not, they must have financial goals.”

Horn says some people set these goals consciously, and others do it on a subconscious level. “All the same, financial goals should exist for all households and individuals. Perhaps that should be issue number one in your household budget address,” advises Horn.

Save yourself by saving your money

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Along with rising and rampant levels of debt, the Momentum/Unisa research also indicated that many South Africans simply don’t have access to emergency savings. Many consumers have been forced to sacrifice savings in order to cover expenditure and service their existing debts. But Horn says saving is a key component of a sound financial plan.

“Life happens, and when it does, you need to be able to meet it head on. Ask yourself, could you survive for three months without your salary? Would you have enough to cover urgent car repairs; or, even insurance excess without a loan?”

If you want to avoid possible financial ruin, Horn seriously advises building up an emergency fund and to be prepared for all of life's major pitfalls. Horn advises taking a look at your budget and assess where you can free up some money to stash away in your emergency fund.

“The truth is, more than half of South Africans cannot even afford a financial setback of R20 000. You need to start figuring out how much emergency money you should have based on your lifestyle and expenses,” says Horn.

Don’t forget about retirement

Burying your head in the sand and hoping for the best is definitely not a solid retirement funding strategy. Horn says people need to start saving for retirement as early as possible in their lives. The earlier the better.

“The stats tell us that only 6% of South Africans are able to retire comfortably,” says Horn. “But don’t let that scare you. If you do not know whether you’re on track for a financially stable retirement, it’s never too late to make a plan.”

If you’ve never had a retirement plan prepared, and you don’t know whether you are putting away enough for retirement, Horn advises speaking to a financial adviser to assist with formulating and reaching realistic retirement goals.

If you are having trouble with debt, can’t save or lack a solid retirement plan, Horn says there is no substitution for the right advice. “A financial adviser can assist you with consolidating your debt; creating savings goals and managing your retirement portfolio. Find one you can trust and start making a positive impact on your household budget address,” Horn concludes.

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