Picture: CHRIS RATCLIFFE/BLOOMBERG.

Household budgets are coming under increased pressure due to the rising costs of living. The past year saw the rise in VAT that resulted in higher food prices, basic municipal services, and the highest petrol price hike in years. The scenario has left households with unplanned debt. As a result, little is left over to save for emergencies, medical care, and other investment objectives or for retirement.

The latest Momentum/Unisa Consumer Financial Vulnerability Index shows a worsening trend across all indicators of financial vulnerability. 66% of people polled were struggling to spend within their budget and had resorted to taking on new lines of credit; 68% participating do not consider the risks when taking on more credit.

Head of Momentum Core Distributions, Bekithemba Mafulela, says we as consumers need to go back to the basics, and apply good financial habits, to overcome the tough economic climate in South Africa.

“The key to finding financial freedom is living within your means, allowing one to also save towards life’s important milestones including retiring comfortably. The current situation in South Africa and many other emerging African markets, however, has made it very hard for many to reach the goal of financial freedom.”

Here are Mafulela’s top three savvy saving tips:

Stick to your budget

Financial experts and advisors across the board have been shouting the mantra of ‘budget your money’ for years. In the current economy, this advice can’t be preached enough. Following a budget is a good and effective way to gain control over your finances and give yourself and your family the financial security you desire.

“You need to have a budget and stick to it. A budget will help you to cut back on unaffordable luxuries such as eating out, allowing you to save for the future and balance your wants for today with your needs for the future,” says Mafulela.

Have a hawk-eye for saving

Buying clothes, gadgets and dining out is fun while saving can be seen as boring. Spending wisely and finding ways to save, however, has helped millions of people not only cope with financial difficulties but also save for their futures. Mafulela says there are many ways that consumers can save more, if they are finely attuned to their spending habits and on the lookout for money-saving deals.

“Buy wisely by looking out for good deals in supermarkets. A weekly meal plan and shopping list mean fewer impulse buys and less wasted food. These types of meal plans can also help you pinpoint where you can get the most bang for your buck. To get the best value, you may need to shop at more than one place. Local butchers and grocers, as well as discount supermarkets, can help you save significant amounts on your grocery shopping,” says Mafulela.

He adds that there are many other ways to cut back on monthly household expenses.

“At home, turn your lights off in empty rooms and find other ways of saving on electricity e.g. switching off your geyser when you away from home for a few days.Parents may be surprised at how much petrol they can save if they are able to form alliances for school lift clubs so that they do one trip to school and back instead of two per day,” continues Mafulela.

Cash is king

According to the National Credit Monitor, only 48% of the 24-million credit-active consumers were up to date with their credit payments in the first quarter of 2017. Reports show that while consumers continue to take out more loans, showing that many citizens resort to credit when the going gets tough even though many are already drowning in debt.

“Clear out unnecessary retail debt such as clothing accounts and try not to use your credit card for everyday expenses, unless funded in advance for those that want to take advantage of different credit card loyalty programs. Remember that cash is always king. As you pay off debt, use the savings to pay off other debt and start putting available cash into savings. Financial freedom isn’t out of reach if you can commit to these tangible changes in your life,” concludes Mafulela.

PERSONAL FINANCE