It's official - we're in our first recession since 2009. See it through with these tips to better manage your money.
With South Africa's gross domestic product (GDP) shrinking by 0.7% this year, economists are warning that now's the time to tighten money belts. But what does a recession mean for you and your monthly budget?
Onalenna Disipi, a Certified Financial Planner with Discovery, explains that a recession affects your future potential income and spending power because it often signals weak wage growth, retrenchments and tax hikes.
"For consumers, a recession means that they need to make careful decisions about what they spend their money on. People with a lot of debt should make paying off debt their biggest priority and using any disposable income to build up a savings buffer," Disipi says.
Onalenna Disipi, Discovery Certified Financial Planner
You should also be wary of making any knee jerk decisions about your investments, savings and further debt. Knowing your financial status is key:
1. Track your rands
When you budget (which you must!) don't just count 'static' expenses like your monthly rent or insurance premium, but daily transactions too. Little purchases like cool drinks or magazines can easily add up, so try recording each rand you spend every day for a month. You'll quickly see where your money is disappearing to.
2. Be frank about exactly how much you owe
Be frank with yourself about exactly how much you owe. This includes a bond, study or car loan and short-term credit such as credit cards, personal loans and store cards.
3. Squash any short-term debt
If you have short-term debt, work out a plan to tackle the biggest debt with the highest interest rate first. Pay in any extra amounts you can afford, and don't buy anything more on your credit or store card.
4. Build an emergency savings fund
If you've paid off short-term debt, start building up an emergency savings fund, which should equal at least three months' full living costs for you and any dependants.
5. Don't support costly lifestyle habits in favour of saving
Rather find clever ways to change your lifestyle to still enjoy the things you love, like good food, quality time with friends or spending time outdoors, without spending more money.
6. Care less about fast-changing consumer trends
Don't make unnecessary purchases, like a new cell phone or car, unless you really need it. Change your attitude about what matters - if you focus on experiences rather than buying the latest gadgets or items, you may well gain more in the end.
7. Don't skimp on adequate insurance and medical aid
Most people hugely underestimate what cover they'd need if they became unexpectedly ill or unable to work. Speak to a financial adviser and make sure your basics are sorted out.
8. Maximise on loyalty programmes
Most financial providers and retail stores have partners and programmes that offer valuable benefits, so take advantage of them by figuring out where you can save or get cash back. For example, the Discovery Vitality wellness programme offers up to 25% cash back on HealthyLiving items like nutritious food, personal care products and sports gear.
9. Build up a good savings buffer
Make a point of always having some cash left over in your account at the end of the month, especially in case of unexpected expenses like emergency travel or transport issues. This will also help get you into the routine of delaying your spending - a good habit to have!
Disipi also advises taking the time to speak to an experienced financial adviser about your goals, "Often we don't want to think about our money situation and we procrastinate getting solid advice. But the sooner you get a sound financial plan, the sooner you can start building the financial future you want."
Take your money further with Discovery Miles
Now here's a great way to reap instant rewards when you save:
- You earn Discovery Miles every time you swipe your Discovery Credit Card.
- You can earn up to 10 times more Discovery Miles by shopping at the wide range of partner stores in the Discovery Miles Multiplier Network if you have activated the benefit. This network covers everything from daily groceries, electronics, sports and outdoor equipment, and even your fuel at BP filling stations.
- Spending your Discovery Miles digitally is also easy. You can use them to shop online at partners like takealot, Yuppiechef, Pick n Pay, Dis-Chem and Sportsman's Warehouse, or add them up to help fund your next holiday.
If you're thinking about borrowing money for a big life purchase like a new home, a car or an overseas family holiday, it's important to know your credit score. Why? Because knowing where you are on the scale can have a huge effect on the interest rates you'll be offered.
On the back of National Savings Month in South Africa, a recent report from the World Economic Forum (WEF) highlights the startling gaps between financial needs in retirement and what consumers are actually saving.