South African consumers are clutching at financial straws following the announcement of yet another increase in interest rate by the South African Reserve Bank (SARB).
Lee Hancox, Head of Channel and Segment Marketing at Sanlam and a Certified Financial Planner said: “Absorbing a further 75 basis points, even for those who don’t have a large amount of debt, has a significant impact on your disposable income.”
“It’s a big jump. Those of us who might have had a bit of breathing room in our budget a year ago, may not have that anymore.”
Here’s how people can manage the rise in interest rates:
Revisit your financial goals
Write down your financial goal and decide which goals you are going to prioritise.
When drawing up your budget remember to include your day-to-day expenses. While you are busy with your budget, write up a list of your monthly groceries so you can calculate how much you need to set aside.
You should also review your budget to cut down on unnecessary expenses.
Hancox said that an emergency fund can be used for unforeseen expenses that you cannot budget for, like when your car breaks down.
People need to have at least three months’ salary saved up in an emergency fund, according to Katlego Gaborone, a financial planner at Momentum.
Take care of your bills
It may seem obvious but paying your bills on time every month is important. If you pay late you may pay a penalty or interest will accumulate on your overdue amounts.
Speak to a financial adviser
Hancox said: “Financial advisers are there to help you on your journey to financial confidence, to help you articulate your goals, and put plans in place to achieve them.”
You should speak to your financial adviser if you are tempted to save money by cancelling or decreasing your retirement savings or life cover contributions.
This is a big decision that you need to discuss with your financial adviser to make sure that you have considered all of your options.