How you can apply minister's Budget message to your own finances
Closing the mouth of the hippopotamus to preserve the next generation’s inheritance is indeed a Herculean task. In his Supplementary Budget speech yesterday, Finance Minister Tito Mboweni spoke about the government’s intention to avoid additional debt due to the long-term crippling implications that could have for the economy. Similarly, now is the moment for individual South Africans to take stock, reprioritise finances and avoid the pitfalls of credit as much as possible whilst trying to navigate these challenging times.
With our economy expected to contract by 7.2% this year, perhaps now’s the time to pursue a zero-based budgeting approach of your own. This means starting from base zero to when it comes to household expenses and commitments and aligning these with the income that is available. Kenosi Magosha, head of client solutions savings at Sanlam, suggests a complete reassessment of spending, starting from zero, rather than tweaking an existing budget and reviewing priorities. “It may be beneficial to work with a trusted financial adviser to achieve this, so you don’t overlook non-immediate concerns or financial commitments that have longer-term benefits.”
Magosha says there is some good news in that Mboweni expects interest rates and inflation to remain stable at current low levels (CPI inflation has dropped year-on-year to 3%, according to the latest figures from StatsSA), so the cost of living and financing existing debts will not be too high. If there is any freed up income the best way to allocate this will be key as part of applying zero-based budgeting to one’s finances. The focus on reopening the economy and the financing focus to enable this has become a necessity given stretched government and personal finances and offers hope where livelihoods have been severely affected. There is, however, the need to ensure proper precautions continue to be taken and the government is also allocating resources to ensure this happens.
“Minister Mboweni referenced the narrow gate which speaks to some of the discomfort and difficulty ahead. We need to engage with the reality we’re facing - our lives have changed - and re-prioritise our finances to ensure we’re meeting the essentials while laying foundations for the future. We also need to ensure our debts now do not detract from the prospective prosperity of future generations - and from our own chance at sustained financial wellbeing now and in the future.”
She adds that it’s critical to identify key priorities to enable financial growth and resilience. “The minister also mentioned how we will not see immediate relief from many of these actions. As individuals, we need the same patience as we focus on rebuilding our financial lives. Many of the measures we’re putting in place now will pay dividends later on.”
South Africans are known for saving insufficiently for emergencies. Covid-19 has brought this home starkly and forced many to see how important it is to have emergency funds in place. However, there is hope. Magosha says it’s never too late to start a new course of action to align with long-term financial goals and it will be important that we take the first step and not delay further.
Just as Minister Mboweni says, the storm is not over, but if we make the right decisions to prepare for a new reality, soon enough our nation will emerge into the new day healthy and strong. The same can be said for the financial decisions we make during these unprecedented times; they will directly impact our financial futures and that of the next generation.