Financial planning if key every festive season. Photo: Pixabay

JOHANNESBURG – In a weak economy, managing one’s finances and making ends meet at the end of every month is a lot like completing an obstacle course. However, reviewing and adjusting your household budget once a year like the Minister of Finance does for the country, can make it a lot easier.

“In the same way that the national government takes a hard look at the state of the economy every February, and puts measures in place to strengthen it, consumers need to reassess their challenges and opportunities annually,” said Old Mutual Head of Financial Education, John Manyike.

“Families were hit hard by the increase in the price of fuel and electricity last year, as well as the VAT hike. For some people, the situation has become so desperate that they opt for a quick financial fix like a fast loan, or rely heavily on credit and store cards to simply buy groceries.” 

He points out that this can be a financially crippling decision which only adds to long-term financial strain as it starts a vicious debt cycle that is very hard to get out of.

“It is more important than ever to become money smart to ensure you survive month-end Salticrax stress and start reducing your debt.

Manyike offers the following tips for a shockproof household budget:

1. Commit to a budget

  • Compile a comprehensive household budget and stick to it.
  • Make a list of wants versus needs, and focus on the needs. If and when you can afford it, you can set aside some money for one family outing or treat per month.
  • Educate your family about balancing a budget and get them involved with working out the family’s financial goals and financial plan.
  • Minimise unrealistic demands and expectations.

2. Cut your transport costs

  • Look for schools closer to home if transport costs are decimating your budget. Or move closer to your workplace or children’s school.

3. Keep your family healthy

  • Plan healthy meals for your family, including lunchboxes for school and work.
  • This helps avoid overspending on takeaways, tuck-shop and canteen lunches.
  • Having a healthy family will help keep illnesses at bay and also reduce your medical expenses.
  •  Cut out sugar too for health reasons and to save on sugar tax. 

4. Quit bad habits

  • Stop smoking and cut down your alcohol intake: you’ll save a lot every month.
  • You will also avoid paying ‘sin tax’, the tax on tobacco and alcohol.
  • As a non-smoker, you’ll be healthier and this will help keep your medical costs down.

5. Stay up to date

  • Read or listen to the 2019 Budget Speech on 20 February and take note of any taxation changes that could affect your financial decisions.
  • To rent or to buy a property may be a question on your mind, for example. If so, consider the fact that properties under R900 000 are exempt from transfer duties altogether.

6. Keep Saving

  • No matter what, don’t stop saving.
  • Stay committed to your long term goals such as a tertiary degree for your child and a comfortable retirement for you.
  • Take advantage of tax-free savings options.

7. Don’t live to impress

  • Don’t put yourself under pressure by trying to keep up with the Kardashians, the Khumalos, or the Karims.
  • Live and dress according to your means and not according to your friends’ lifestyles (who may also be deep in debt behind the scenes).

8. Learn to say NO!

  • Don’t let your children push you into buying things they don’t need and you can’t afford.
  • Teach your children about budgeting, planning and saving.
  • Explain the importance of resisting peer pressure.

“Just like our government does every year at Budget Speech time, the toughest task is facing the reality of the situation and working out an achievable plan. Then work together as a family to stick to the plan, even during difficult months. You can also speak to an accredited financial adviser to help you stay on track,” said Manyike. 

PERSONAL FINANCE