CAPE TOWN - The news last week that GDP shrunk by 2.2% in the first quarter of this year sent shockwaves through the financial sector (though some economic experts contend that the figure might not be quite accurate).
Whether or not we can trust the data, this news, in addition to the huge petrol price hike of 82c as well as April’s VAT hike will no doubt knock consumers – hard.
In fact, data shows that South Africans are already feeling the pain.
According to data from automated rental payment platform, PayProp, there’s been a national increase in the percentage of tenants in arrears from 18.5% in April 2017 to 23.2% in March 2018. That equates to approximately 1 in 4 tenants falling behind on their rent.
The worrying factor is that these are tenants “who have been vetted and approved by estate agents”, says PayProp. In other words, these are people who have recently fallen on hard times.
For South Africans looking to cut back on their debt and get out of the red the first step is a long hard review of their financial situation. And then, for as long as necessary, stay conservative in your spending.
“You’re going to need to be hard on yourself. Go over your buying habits and find the areas where you’re just losing money.
PriceCheck CEO, Kevin Tucker concurs and urged South Africans to be both conservative and smart in their buying. "Cut out spending on what you don't need, and when you do need it, do your homework on where to get the best deals," says Tucker.
And don’t buy on credit. As it is, 72% of South African salaries go towards servicing debt, leaving little money for anything else.
That can be hard when you need to get big ticket items such as a fridge but this is where purchasing models such as Teljoy’s rent-to-own come in handy.
Models such as these also help consumers to plan their budgets better.
But it’s not enough to look at your current situation. According to some data, 92% of South African retirees do not have adequate savings.
If savers were to stop and consider how diverting, say, a regular additional R200 or R2000, or whatever they could afford, a month into a low cost, long-term investment, they might more easily be able to find that additional saving, advises Emma Heap, chief growth officer of retirement fund administrator 10x Investments.
“Compound interest, which Warren Buffet himself is said to have described as the 8th Wonder of the World, means that savings grow exponentially, creating a snowball effect, where you earn growth on the growth and so on.”
So it comes down to these two important factors: get rid of your debt now through cutting down on reckless spending and smarter buying, and save now and for the future.
Jonathan Hurvitz is the financial director at Teljoy.
The views expressed here are not necessarily those of Independent Media.