South Africans are feeling the financial pinch. Fuel and food prices are skyrocketing, electricity prices are climbing even with incessant load shedding, and interest rate hikes have added thousands of rands to home and car loans. In a country with one of the worst savings rates in the world, South Africans are struggling to make it to their next pay day.
“Citizens in the country are collectively tightening their belts to cope with the rising cost of living,” says Peter Olyott, CEO of financial services provider, Indwe Risk Services (Indwe). “Together with monthly budgets, saving goals, managing expenses and picking up a side hustle, people are looking for other creative avenues to reduce their living costs whilst not creating undue onerous exposures.”
According to Olyott, there are at least six effective ways one can reduce or optimise spending and help ease your financial burden:
Transport
With rising fuel prices, transport costs can quickly add up. Try to limit the kilometres you drive by carpooling or ridesharing with family, friends or colleagues, and remember to keep your insurer notified if you do so. Consider insurances which reduce the premiums if you drive less.
Regularly service your vehicle and check your tyre pressure to ensure that it continues to run efficiently. Improve your driving habits so you avoid harsh acceleration and braking, which increases fuel consumption. Consolidate errands to save both petrol and time and do less frequent but larger monthly grocery shops.
Groceries
Create a weekly food menu and a monthly shopping list, which helps you avoid making impulse purchases. Look out for specials and loyalty savings, and stock up when you see these non-perishable items on sale. Plan your meals around supermarket specials but also ensure that you use the items you’ve already got in your cupboard. Rethink your choice of protein, which is often the most expensive items on your list and use staple ingredients to make multiple meals.
Electricity
In the midst of load shedding we’re enjoying theoretical savings, especially when we are without power for up to three to four sessions a day! Switch to energy-efficient light bulbs and where possible, replace old appliances with energy-efficient models. Purchase approved surge protection devices to use with your most expensive electronic devices. It may be a costly initial outlay but it could save you thousands of Rands.
Seal windows and doors to prevent loss of heat in winter and loss of cool air in summer. Adopt better habits such as turning off unnecessary lights, putting a lid on your pot of boiling water and unplugging non-essential items that aren’t in use. Switching to solar for lights and heating can be a costly investment but it will reduce your monthly electricity bill in the long term and keep the lights on during load shedding. Consider switching to gas for your cooking equipment as well.
Living space
Your rent or home loan, together with rates, utilities and maintenance are often a significant portion of your monthly expenses, and you could reduce these by downsizing to a smaller home or moving to a more affordable neighbourhood. Before you make the move, however, consider moving costs, additional expenses such as levies or new furniture, and potential extra travel time going to work or taking kids to school.
Something else to consider is renting out a room in your home, if the house is a large one, or getting a tenant into your garden or granny flat. This additional revenue helps you offset increased costs but remember to calculate all the tax implications at the same time.
Reduce extravagances
This one is possibly the hardest of all to stomach psychologically! While you should reward yourself with occasional treats, if you’re serious about saving then you need to limit your luxury purchases. Cut back on your daily takeaway coffee and rather brew a pot at home or the office. Take a packed lunch to work instead of choosing a takeaway option and eat dinners at home rather than frequenting restaurants. Cancel subscriptions you aren’t using anymore and buy second-hand items instead of something new.
Insurance and medical aid
When looking for ways to cut monthly costs, people often turn to insurance and cancel their policies to ease their financial difficulties. But as life is uncertain, it’s impossible to predict when a life-changing event will impact you and your family, exposing you to potential financial disaster. There are several ways you can reduce your premiums while making your insurance work for you:
- Obtain quotations on your homeowner insurance (your home) and compare that to what you are currently paying through your bank or bondholder. Switching your building insurance cover from your bank to your insurer could save on bank costs, whilst getting a premium saving and enjoying lower excesses. Of course, your bank may also match your alternative premium which still achieves your goal.
- Insure all your assets with one insurer to simplify the process and enjoy a potential discount.
- Relook your excess options and increase your excess payable to lower your monthly premium. This puts more risk on you as you must be able to pay the high excess should you need to. Effectively managing high frequency but smaller claims, is ultimately more cost-effective than passing on the risk to an insurer.
- Making annual or biannual payments often results in a discount through your insurance company.
- Review cover regularly to keep track of policies and cover, especially if your life or circumstances have changed. These could result in large premium savings.
- Reconsider the efficacy of policies. Are they still relevant and will they achieve the intended outcome should something happen?
- Relook your insurance covers to ensure that all of the potentially catastrophic exposures are covered first and properly, such as the ones that can ruin you financially. Then look at the items which are less crucial from a financial viability point of view, such as cellphones or sports equipment.
- Look at alternative medical aid structures together with gap covers. In some cases it can provide really effective and comparable benefits at much lower monthly contributions.
During challenging financial times, people are forced to make adjustments and prioritise where they spend their money. When it comes to expenses, there are some that are unavoidable, however there are ways to reduce these monthly costs. The first step to creating a successful budget begins with the challenging task of deciding on your wants versus your needs. A want is an expense that is not necessary for survival and that you can comfortably live without, whereas a need is essential for daily living, working and moving around. These include housing, rent or bond, transportation, utilities, food, and data.
“It’s also just as crucial to make room for savings. We highly recommend reaching out to an advisor or financial planner for advice, particularly when you want to save on your insurance. With motivation – from you – and guidance from an expert, you can make small changes that result in significant savings, enabling you to live a little more comfortably within your means,” says Olyott.
