By Deon Nobrega
Saving may seem like a pipe dream at the moment, given the economic climate in the aftershock of several consecutive Covid-19 lockdowns and unrest in parts of the country.
Last year, South Africa’s economy contracted seven percent. And while the South African Reserve Bank reportedly expects the economy to get back to pre-Covid levels by 2022, this is likely to be adversely impacted by the third wave and the recent violence in Gauteng and KZN.
In April, TransUnion stated that its Consumer Pulse Report found that 39% of the 910 South Africans surveyed between 5 and 17 March plan to pay partial amounts towards their bills or loans to remain current. Almost half, 46%, said they were past due on a bill or loan that had been payable in the past three months.
In May, debt counselling company DebtBusters said that the number of South African consumers seeking help to manage debt gained 31% in the first quarter when compared to the first three months of 2020.
This picture is made more dire by the fact that South Africans have no savings to fall back onto.
According to Trading Economics, South Africa’s household saving rate dropped to 0.50 percent in the fourth quarter of 2020, from 0.70 percent in the third quarter of 2020.
South Africa does not have a culture of saving, perhaps the result of easy access to credit, and the overall rate may as well be in negative territory: people spend more than they earn, and savings are just not happening at all.
To get to the point where you can save, you need to first sort out debt, and avoid getting into any more.
To do this, it’s essential to put a plan into place.
Developing a plan
Grab a pen and a piece of paper and put down your three biggest money challenges. This could be meeting your monthly expenses, reducing your debt, or saving.
When you have written these all down, start tackling them one-by-one. It’s generally a good idea to pay off debts before you start saving.
A good way to do this is to identify the debt that you are paying the most interest on (this will usually be a loan you incurred without putting any property up against it and likely was granted as a personal loan).
Working out how much extra to put into debt will require a budget. Work out exactly how much is coming in each month, and how much needs to go out, and then determine how much extra you can pay each month and put that away.
Be realistic when you do this. Don’t forget that you may see your budget increase if food prices continue to go up, for example.
When you have paid off that first debt, which is possible, take the cash that you were spending on debt and put that into the next debt on your list. You can then also look at starting to save. Speak to your bank, they will be more than willing to help you not only select which debt to pay off first, but also help you save when you get there.
There are several saving options available that provide various growth amounts, but the right one will depend on why you are saving. It could be for home repairs, or secondary or tertiary education for your child. It could even be so you can study further. Whatever your needs, your bank can help with deciding on which product is right for you.
But you can only save for your future when you’ve cleared away the debt of your past.
By starting today with a clear plan, you can slowly chip away at your debt, save money, and achieve your goals.
Deon Nobrega is Managing Director of Paymenow